0000950116-01-500871.txt : 20011009
0000950116-01-500871.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950116-01-500871
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011107
FILED AS OF DATE: 20010927
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC
CENTRAL INDEX KEY: 0000096988
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389]
IRS NUMBER: 221825970
STATE OF INCORPORATION: NJ
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-07708
FILM NUMBER: 1745820
BUSINESS ADDRESS:
STREET 1: 2828 CHARTER RD STE 101
CITY: PHILADELPHIA
STATE: PA
ZIP: 19154
BUSINESS PHONE: 2156766900
MAIL ADDRESS:
STREET 1: 2828 CHARTER RD
CITY: PHILADELPHIA
STATE: PA
ZIP: 19154
FORMER COMPANY:
FORMER CONFORMED NAME: TELESCIENCES INC
DATE OF NAME CHANGE: 19880201
DEF 14A
1
def14a.txt
DEFINITIVE PROXY STATEMENT
MARLTON TECHNOLOGIES, INC.
2828 Charter Road
Philadelphia, Pennsylvania 19154
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 7, 2001
---------
To the Shareholders of MARLTON TECHNOLOGIES, INC.:
The Annual Meeting of Shareholders of MARLTON TECHNOLOGIES, INC. will
be held on November 7, 2001 at 9:00 a.m. at the Main Conference Room, Sparks
Exhibits Building, 2828 Charter Road, Philadelphia, Pennsylvania 19154, for the
following purposes:
(1) To elect two directors to the Company's Board of Directors.
(2) To consider and vote upon the transactions contemplated by the
Subscription Agreements (the "Subscription Agreements") by and
among Marlton Technologies, Inc. (the "Company"), Marlton
Technologies (PA), Inc. ("Newco"), which is a newly formed and
wholly-owned Pennsylvania subsidiary of the Company into which
the Company will be merged if Proposal No. 3 is approved and
which would be the surviving entity in such merger (the
"Surviving Company"), and certain investors (the "Investors"),
dated as of August 23, 2001, attached as Annex II and Annex III
to the Proxy Statement, and in connection therewith, to
consider and vote upon (i) the issuance to the Investors of
5,300,000 shares of common stock, without par value, of the
Surviving Company ("Surviving Company Common Stock"), and (ii)
the issuance to the Investors of warrants to purchase up to
5,300,000 shares of Surviving Company Common Stock (and the
exercisability thereof), all as set forth in the Subscription
Agreements and the other documents related thereto; provided,
however, in the event that Proposal No. 3 is not approved,
instead of the Surviving Company being the issuer, the Company
will be the issuer of the stock and warrants purchased pursuant
to the Subscription Agreements.
(3) To consider and vote upon a proposal to merge the Company into
Newco, which would be the surviving entity in such merger, in
order to change the Company's state of incorporation from New
Jersey to Pennsylvania.
(4) To consider and vote upon the 2001 Equity Incentive Plan
Proposal.
(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on September 24, 2001 has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
-1-
YOU ARE EARNESTLY REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT
THE MEETING, TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By order of the Board of Directors
Alan I. Goldberg
Corporate Secretary
Philadelphia, Pennsylvania
September 27, 2001
-2-
MARLTON TECHNOLOGIES, INC.
2828 Charter Road
Philadelphia, Pennsylvania 19154
----------
PROXY STATEMENT
----------
Annual Meeting of Shareholders
To Be Held November 7, 2001
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Company Board") of MARLTON TECHNOLOGIES, INC.
(the "Company") of proxies to be used at the Annual Meeting of Shareholders to
be held November 7, 2001 and at any adjournments thereof (the "Annual Meeting").
If the enclosed Proxy is properly executed and returned, the shares represented
will be voted in accordance with the instructions specified by the shareholder.
If no instructions are given with respect to any matter specified in the Notice
of Annual Meeting to be acted upon at the Annual Meeting, those shares will be
voted (i) FOR the nominees for director set forth below under Proposal No. 1
(with discretionary authority of the proxy holders to cumulate votes), (ii) FOR
the Investment Transaction Proposal described below under Proposal No. 2, (iii)
FOR the Reincorporation Proposal described below under Proposal No. 3, (iv) FOR
the 2001 Equity Incentive Plan Proposal described below under Proposal No. 4,
and (v) in the discretion of the proxy holders upon such other business as may
properly come before the Annual Meeting. Proxies may be revoked at any time
prior to being voted (i) by delivery of written notice to the Company's
Corporate Secretary, (ii) by submission of a later dated proxy, or (iii) by
revoking the proxy and voting in person at the Annual Meeting.
As the proposals contemplated by the Investment Transaction Proposal
(the "Investment Transaction"), the Reincorporation Proposal (the
"Reincorporation") and 2001 Equity Incentive Plan Proposal (the "2001 Equity
Incentive Plan") are independent of one another, shareholders may approve all
three proposals or they may approve the Investment Transaction, the
Reincorporation or the 2001 Equity Incentive Plan without approving any others.
Accordingly, this Proxy Statement indicates what will happen if all of the
proposals are approved and what will happen if at least one, but not all of
these three proposals are approved.
This Proxy Statement, the enclosed Proxy and the 2000 Annual Report of
the Company are first being mailed to the Company's shareholders on or about
September 25, 2001.
VOTING RIGHTS
Only shareholders of record at the close of business on September 27,
2001 (the "Record Date") will be entitled to vote at the meeting. On that date
there were outstanding 7,613,449 shares of the Company's common stock, par value
$.10 per share ("Company Common Stock"). Each share of Company Common Stock is
entitled to one vote on all matters, except that cumulative voting rights
currently are in effect for the election of directors. To conduct the business
of the meeting, a quorum of shareholders must be present. This means at least a
majority of the issued and outstanding shares of Company Common Stock eligible
to vote must be represented at the meeting, either by proxy or in person. With
respect to Proposal No. 1 (the "Election of Directors Proposal"), each
shareholder may cast as many votes as there are directors to be elected for each
share held by him, and may cast his total number of votes for one nominee or
divide the total among any number of nominees. The two candidates receiving the
greatest number of votes cast will be elected as directors of the Company. With
respect to Proposal No. 2 (the "Investment Transaction Proposal") and Proposal
No. 4 (the "2001 Equity Incentive Plan Proposal"), the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock present
and entitled to vote at the Annual Meeting on such proposal is required to
approve the proposal. Regarding Proposal No. 3 (the "Reincorporation Proposal"),
the affirmative vote of two-thirds of votes cast at the Annual Meeting on such
proposal is required to approve the proposal. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock present
and entitled to vote at the Annual Meeting is required to approve any other
proposals which may properly come before the Annual Meeting or any adjournments
thereof. Abstentions will be counted for purposes of determining a quorum but
will not be counted otherwise, and broker non-votes on specific matters will not
be counted for any purpose. Broker non-votes occur as to any particular proposal
when a broker returns a proxy but does not have authority to vote on such
proposal.
SECURITY OWNERSHIP
The following table sets forth certain information as of September 1,
2001 with respect to (i) those persons known by the Company to be the beneficial
owners of 5% or more of the Company Common Stock, and (ii) each director,
nominee, executive officer, and all directors and executive officers of the
Company as a group:
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class (1)(11)
------------------------------------ -------------------- -------------
Lawrence Schan 904,600(2) 11.9
507 Fishers Road
Bryn Mawr, PA 19010
Ira Ingerman 903,292 (2) 11.9
1300 Centennial Road
Narberth, PA 19072
Stanley D. Ginsburg 772,492 (2) 10.1
50 Belmont Ave., #1014
Bala Cynwyd, PA 19004
Lombard Associates (3) 704,126 9.2
115 East 62nd Street
New York, New York, 10021
Robert B. Ginsburg 709,032 (4)(5)(11) 8.6
2828 Charter Road
Philadelphia, Pennsylvania 19154
Alan I. Goldberg 695,892 (5)(6)(11) 8.5
2828 Charter Road
Philadelphia, Pennsylvania 19154
-2-
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class (1)(11)
------------------------------------ -------------------- -------------
Tsubasa System Co. Ltd. ("Tsubasa") 500,000 6.6
Tachibana Annex Building
2-25-14 Kameido, Koto-Ku
Tokyo, Japan 136
Dimensional Fund Advisors Inc. 419,900 5.5
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Fred Cohen 150,093 (7) 2.0
Dr. William F. Hamilton 94,002 (8) 1.2
Seymour Hernes 73,672 (9) 1.0
Stephen P. Rolf 21,000 (10) .3
All directors and executive officers as a group
(6 persons) 1,743,691 (4,5,6,7,8,9,10) 19.4
-------------------
(1) Percent of class has been computed on the basis of the number of shares of
Company Common Stock outstanding as of September 1, 2001, plus for any
shareholder or shareholder group, the number of shares which would be
outstanding if that shareholder or shareholder group exercised all stock
options and conversion rights exercisable within 60 days after September
1, 2001.
(2) 1,809,000 of these shares of Company Common Stock are held by the DMS
Store Fixtures Shareholders Trust ("Trust") described below. 452,250
shares were contributed by Mr. S. Ginsburg, 452,250 shares were
contributed by Mr. Ingerman and 904,500 were contributed by Mr. Schan. By
virtue of provisions of the Trust, Messrs. Ginsburg, Ingerman and Schan
have shared voting power with respect to the 1,809,000 shares held by the
Trust. In addition, Mr. Ginsburg directly owns 320,242 shares of Company
Common Stock, Mr. Ingerman directly owns 279,142 shares of Company Common
Stock and Mr. Schan directly owns 100 shares of Company Common Stock.
Also, Mr. Ingerman has sole voting power over 171,900 shares held by him
as custodian under the DMS Employee Shareholders Agreement described
below. As a result of the foregoing, Mr. Ginsburg may be deemed to
beneficially own 2,129,242 shares (27.9% of the shares of Company Common
Stock outstanding); Mr. Ingerman may be deemed to beneficially own
2,260,042 shares (29.7% of the shares of Company Common Stock
outstanding); Mr. Schan may be deemed to beneficially own 1,809,100 shares
(23.7% of the shares of Company Common Stock outstanding) and the Trust
may be deemed to beneficially own 1,809,000 shares (23.7% of the shares of
Company Common Stock outstanding). These individuals collectively may be
deemed to beneficially own 2,580,384 shares (33.9% of the shares of
Company Common Stock outstanding). Of the shares beneficially owed by
these individuals, Mr. Ginsburg has sole voting power with respect to
320,242 shares, shared voting power with respect to 1,809,000 shares and
sole investment power with respect to 772,492 shares; Mr. Ingerman has
sole voting power with respect to 451,042 shares, shared voting power with
respect to 1,809,000 shares and sole investment power with respect to
731,392 shares; Mr. Schan has sole voting power with respect to 100
shares, shared voting power with respect to 1,809,000 shares and sole
investment power with respect to 904,600 shares; and the Trust has sole
voting power with respect to 1,809,000 shares.
(3) Lombard Associates is a sole proprietorship owned by Charles P. Stetson,
Jr.
(4) Includes an aggregate of 623,369 shares which Mr. Ginsburg may acquire
within 60 days after September 1, 2001 upon the exercise of outstanding
stock options and conversion rights. In the event the Investment
Transaction and the 2001 Equity Incentive Plan are approved, such options
will be canceled and replaced not less than six months following the
cancellation, as more particularly described under the heading
"Participation by Current Officers in Investment Transaction" in the
Investment Transaction Proposal.
(5) Does not include for each of Messrs. Goldberg and Ginsburg 245,560 shares
held by the Company's 401k Plan for the benefit of Company employees. Each
of Messrs. Goldberg and Ginsburg is a trustee of such plan, and each
disclaims beneficial ownership of all such shares except those shares held
for the direct benefit of each as a participant in such plan.
(6) Includes an aggregate of 591,341 shares which Mr. Goldberg may acquire
within 60 days after September 1, 2001 upon the exercise of outstanding
stock options and conversion rights. In the event the Investment
Transaction and the 2001 Equity Incentive Plan are approved, such options
will be canceled and replaced not less than six months following the
cancellation, as more particularly described under the heading
"Participation by Current Officers in Investment Transaction" in the
Investment Transaction Proposal.
(7) 89,713 of these shares are held in trust for the benefit of the children
of Mr. Cohen and an additional 14,500 shares and an aggregate of 400
shares are held directly by his wife and children, respectively. Mr. Cohen
-3-
disclaims beneficial ownership of such shares. Includes an aggregate of
40,000 shares which Mr. Cohen may acquire within 60 days after September
1, 2001 upon the exercise of outstanding stock options.
(8) Includes an aggregate of 42,398 shares which Dr. Hamilton may acquire
within 60 days after September 1, 2001 upon the exercise of outstanding
stock options.
(9) Includes an aggregate of 1,500 shares held directly by his wife. Mr.
Hernes disclaims beneficial ownership of such shares. Also includes an
aggregate of 41,199 shares which Mr. Hernes may acquire within 60 days
after September 1, 2001 upon the exercise of outstanding stock options.
(10) Includes an aggregate of 20,000 shares which Mr. Rolf may acquire within
60 days after September 1, 2001 upon the exercise of outstanding stock
options.
(11) In the event that both the Investment Transaction Proposal and the
Reincorporation Proposal are approved and consummated, Mr. Robert Ginsburg
will acquire an additional 1,000,000 shares and warrants to purchase
1,000,000 shares of common stock of the Surviving Company ("Surviving
Company Common Stock") (which, together with his other shares of Surviving
Company Common Stock and options to purchase Surviving Company Common
Stock, will result in Mr. Ginsburg beneficially owning approximately 14%
of the Surviving Company Common Stock), Mr. Goldberg will acquire an
additional 300,000 shares and warrants to purchase 300,000 shares of
Surviving Company Common Stock (which, together with his other shares of
Surviving Company Common Stock and options to purchase Surviving Company
Common Stock, will result in Mr. Goldberg beneficially owning
approximately 6.6% of the Surviving Company Common Stock), Mr. Scott Tarte
will acquire 2,000,000 shares and warrants to purchase 2,000,000 shares of
Surviving Company Common Stock (which will result in Mr. Tarte
beneficially owning approximately 20.6% of the Surviving Company Common
Stock), and Mr. Jeffrey Harrow will acquire an additional 2,000,000 shares
and warrants to purchase 2,000,000 shares of Surviving Company Common
Stock (which, together with his currently held shares of Company Common
Stock and options to purchase Company Common Stock, will result in Mr.
Harrow beneficially owning approximately 20.7% of the Surviving Company
Common Stock). In the event that the Investment Transaction Proposal is
approved and consummated but the Reincorporation Proposal is not approved,
instead of the Surviving Company being the issuer, the Company shall be
the issuer of the shares and warrants pursuant to the Investment
Transaction. Messrs. Ginsburg, Tarte and Harrow will execute a
Stockholders' Agreement regarding the voting of their shares and other
matters, as more particularly described under the heading "Stockholders'
Agreement" in the Investment Proposal.
DMS Store Fixtures Shareholders Trust ("Trust")
On December 31, 1997, the Trust received 1,809,000 shares of Company
Common Stock as a result of the acquisition by the Company of DMS Store
Fixtures, Inc. (904,500 shares of Company Common Stock by Mr. Schan and 452,250
shares of Company Common Stock by each of Messrs. Ingerman and S. Ginsburg). The
foregoing table allocates beneficial ownership of these shares to these
individuals in the amounts contributed to the Trust by them, respectively.
Messrs. Schan, Ingerman and S. Ginsburg are collectively referred to as the "DMS
Principals". The DMS Principals will contribute any additional stock
consideration (up to 250,000 shares of Company Common Stock) to be received in
connection with the acquisition to the Trust. The Trust has a term expiring
March 31, 2003. The Trust was established pursuant to the DMS Store Fixtures
Shareholders Trust Agreement (the "Trust Agreement"). The Trust provides that
each of the DMS Principals will be vested in the shares he contributed to the
Trust in five equal annual increments. In the event that any DMS Principal was
to cease being employed by DMS Store Fixtures LLC ("New DMS") without the
consent of New DMS (or with regard to Mr. Schan, without at least seven days
prior written notice of resignation) or was to be terminated by New DMS for
cause (as defined in the Trust Agreement), prior to December 31, 2002, such
person will be entitled to receive only those shares that have vested at that
time, and all unvested shares of Company Common Stock will be divided pro rata
among the remaining DMS Principals. Prior to vesting, the DMS Principals may not
sell, transfer or otherwise convey Company Common Stock that they contributed to
the Trust; however, vested shares may be distributed to the DMS Principal who
contributed such shares and be transferred by such DMS Principal upon his
request and with the consent of the other DMS Principals who have beneficial
-4-
ownership in the Trust at the time of the request. Company Common Stock held in
the Trust will be voted by the unanimous consent of the DMS Principals who have
a beneficial ownership in the Trust at the time of the vote. Mr. Ingerman, as
trustee under the Trust, will vote the shares held by the Trust in the manner
agreed upon by the DMS Principals, or, in the absence of unanimous agreement as
to how to vote, will abstain from voting the shares held by the Trust. The Trust
will terminate prior to the expiration of its term in the event that (i) the
Company and each of the DMS Principals then employed by DMS agree to terminate
the Trust or (ii) the Company ceases to exist pursuant to a merger,
consolidation, recapitalization, reorganization or dissolution. The Trust
provides that each of the DMS Principals will have the right to receive his
allocable share of the stock consideration and any additional stock
consideration upon the dissolution of the Trust. The duration and vesting terms
of the Trust may only be amended by the DMS Principals with the Company's prior
written consent. In the first quarter of 2001, the employment of Mr. Schan was
terminated by his resignation and the employment of Messrs. Ingerman and Stanley
Ginsburg was terminated by the mutual consent of the respective DMS Principal
and New DMS. Each DMS Principal will become fully vested in his respective
shares, provided he does not violate certain continuing confidentiality and
non-solicitation provisions of his employment agreement.
DMS Employee Shareholders Agreement (the "DMS Shareholders Agreement")
In contemplation of the acquisition of DMS Store Fixtures, Inc. by the
Company, certain employees of DMS Store Fixtures, Inc. (the "DMS Employees")
received 171,900 shares of Company Common Stock (the "DMS Employee Shares") in
exchange for shares of DMS Store Fixtures, Inc. that they received as a bonus
prior to the acquisition. Each of the DMS Employees entered into the DMS
Shareholders Agreement pursuant to which Mr. Ingerman serves as custodian of the
DMS Employee Shares and has been granted a proxy to vote the DMS Employee
Shares. The DMS Shareholders Agreement will be in effect until March 31, 2003.
Under the DMS Shareholders Agreement, the DMS Employees will be vested in their
shares, if they remain employed by New DMS at the expiration of the term of the
DMS Shareholders Agreement (with certain permitted exceptions such as death or
disability or termination of employment without cause, as defined in the DMS
Shareholders Agreement) and the performance targets (the "Performance Targets")
are met. In the event that any of the DMS Employees were to cease being employed
by New DMS without the consent of New DMS or were to be terminated by New DMS
for cause, as defined in the DMS Shareholders Agreement, prior to the expiration
of the term of the DMS Shareholders Agreement, all unvested shares allocable to
those DMS Employees will not vest and will be forfeited. Additionally, if the
Performance Targets are not met, the DMS Employees unvested shares will be
forfeited. Under the Performance Targets, all of the shares will vest if the
increase in gross revenue for the year ending December 31, 2002 of New DMS is at
least $15,000,000 greater than the gross revenue of DMS Store Fixtures, Inc. for
the year ended December 31, 1997. If the increase in gross revenue for the same
period is greater than $11,000,000 but less than $15,000,000, a percentage of
the shares will vest, as detailed in the DMS Shareholders Agreement. At the
termination of the DMS Shareholders Agreement, all of the forfeited shares will
be allocated in the following manner: (i) if the Performance Targets are met,
all of the forfeited shares will be allocated to the DMS Principals and the DMS
Employees, pro rata in proportion to the stock consideration received by such
person and (ii) if the Performance Targets are not met, all of the forfeited
shares will be allocated among the DMS Principals in proportion to the stock
consideration received by such persons. The custodian has the discretion at any
time to reduce or eliminate the Performance Targets in his sole discretion. All
of the 171,900 shares subject to the DMS Shareholders Agreement have been
included in the beneficial ownership of Mr. Ingerman set forth in the preceding
table, and none of such shares have been included in the beneficial ownership of
Messrs. S. Ginsburg and Schan.
-5-
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company Board is divided into three classes of directors. At each
annual meeting of shareholders, members of one of the classes, on a rotating
basis, are elected for a three year term. In accordance with the Company's
Restated Certificate of Incorporation and its Bylaws, the Company Board by
resolution has fixed the total number of directors at five. Fred Cohen and Dr.
William F. Hamilton have been designated by the Company Board as its nominees
for election as directors at the Annual Meeting, to serve for the term expiring
in 2004. Since only two nominees are to be elected, proxies cannot be voted for
more than two individuals.
The Company has no reason to believe that a nominee will be
disqualified or unable or unwilling to serve if elected, except that Dr. William
F. Hamilton has agreed to resign if the Investment Transaction Proposal is
approved and consummated. However, if a nominee should become unavailable for
any reason, proxies may be voted for another person nominated by the Company
Board to fill the vacancy. Following is certain information concerning the
nominees, as well as those directors whose terms of office are continuing after
the meeting.
Director
Name Age Since:
---- --- ------
Nominees for Three-Year Term:
Fred Cohen 73 1966
Dr. William F. Hamilton 62 1988
Director Continuing in Office until 2002 Annual Meeting:
Robert B. Ginsburg 47 1990
Directors Continuing in Office until 2003 Annual Meeting
Alan I. Goldberg 49 1991
Seymour Hernes 74 1973
Fred Cohen, a founder of the Company, served as the Company's Chief
Executive Officer from May 1966 until December 1990, and has served as Chairman
of the Board since May 1966.
Dr. William F. Hamilton has been Director of the Management and
Technology Program and Landau Professor of Management and Technology in the
Wharton School and the School of Engineering and Applied Science at the
University of Pennsylvania since 1978. Dr. Hamilton serves as a director of Hunt
Corporation (NYSE), Neose Technologies, Inc. (NASDAQ) and Digital Lightwave,
Inc. (NASDAQ).
Robert B. Ginsburg has served as an officer of the Company since August
1990 and is currently Chief Executive Officer and President of the Company. Mr.
Ginsburg is a Certified Public Accountant. From 1985 to August 1990, Mr.
Ginsburg was actively involved in the development and management of business
opportunities, including the acquisition of manufacturing companies, investment
in venture capital situations and the provision of finance and management
consulting services as a principal of Omnivest Ventures, Inc.
-6-
Alan I. Goldberg has served as an officer of the Company since August
1990 and is currently Executive Officer and Corporate Secretary of the Company.
Mr. Goldberg is a corporate attorney. From April 1987 through August 1990 he was
involved in venture capital investments and business acquisitions as a principal
of Omnivest Ventures, Inc.
Seymour Hernes served as the Company's Executive Vice President from
March 1973 until December 1990, and has served as Vice Chairman of the Board
since January 1991.
Messrs. Ginsburg and Goldberg have employment agreements with the
Company which require the Company and the Board to use their best efforts to
cause them to be elected as directors for a term equal to the term of their
employment agreements.
In the event that Fred Cohen and Dr. William F. Hamilton are elected as
directors at the Annual Meeting and the Investment Transaction is approved and
consummated, but the Reincorporation is not approved, Dr. William F. Hamilton
and Seymour Hernes have agreed to resign as directors, the Company Board will
approve an increase in the Company Board size to seven directors and the
following four individuals, each of whom has consented to serve on the Company
Board, shall be appointed to the Company Board: Jeffrey Harrow, Scott Tarte,
A.J. Agarwal and Richard Vague, with the directors to be staggered on the
Company Board in the following manner: Messrs. Ginsburg and Vague's terms would
end in 2002, Messrs. Agarwal and Goldberg's terms would end in 2003, and Messrs.
Harrow, Tarte and Cohen's terms would end in 2004.
In the event that Fred Cohen and Dr. William F. Hamilton are elected as
directors at the Annual Meeting and both the Investment Transaction and the
Reincorporation are approved and consummated, Dr. William F. Hamilton and
Seymour Hernes have agreed to resign as directors of the Company Board.
Immediately prior to the Reincorporation Merger, the sole director of Marlton
Technologies (PA), Inc., a newly formed Pennsylvania corporation and
wholly-owned subsidiary of the Company ("Newco") and the surviving entity (the
"Surviving Company") of the Reincorporation Merger (as defined in the
Reincorporation Proposal) shall (i) approve an increase in the size of Newco's
board of directors to seven directors, (ii) appoint Robert Ginsburg, Jeffrey
Harrow, Scott Tarte, Alan I. Goldberg, A.J. Agarwal, Richard Vague and Fred
Cohen to Newco's board of directors and (iii) resign as a director of Newco. The
members of the board of directors of Newco immediately prior to the
Reincorporation Merger shall continue as the members of the board of directors
of the Surviving Company (the "Surviving Company Board") immediately following
the Reincorporation Merger. In such event, the Surviving Company Board
immediately following the Reincorporation Merger shall consist of Robert B.
Ginsburg, Jeffrey Harrow, Scott Tarte, Alan I. Goldberg, A.J. Agarwal, Richard
Vague and Fred Cohen. Additionally, as Newco's board of directors will not be
staggered prior to the Reincorporation Merger, the Surviving Company Board will
not be staggered and, as such, all directors will stand for re-election
annually.
In the event that Fred Cohen and Dr. William F. Hamilton are elected as
directors at the Annual Meeting, the Investment Transaction is not approved and
the Reincorporation is approved and consummated, the election of Mr. Cohen and
Dr. Hamilton as directors at the Annual Meeting shall be valid and the Company
Board immediately prior to the Reincorporation Merger shall be the board of
directors of the Surviving Company immediately following the Reincorporation
Merger. Additionally, as Newco's board of directors will not be staggered prior
to the Reincorporation Merger, the Surviving Company Board will not be staggered
and, as such, all directors will stand for re-election annually.
-7-
Following is certain information concerning Jeffrey Harrow, Scott
Tarte, A.J. Agarwal and Richard Vague.
Jeffrey Harrow. Mr. Harrow is 44 years old. Mr. Harrow served as
President and CEO of CMPExpress.com from 1999 through 2000. Mr. Harrow
negotiated the sale of the CMPExpress.com business to Cyberian Outpost, NASDAQ
ticker (COOL) in September 2000. From 1982 through 1998, Mr. Harrow was the
President, CEO and a Director of Travel One, the 6th largest travel management
company in the United States. Mr. Harrow previously served as a board member for
the Company and has served as a board member for Juniper Bank Advisory Board,
Eastern Airlines Advisory Board, Cherry Hill National Bank (sold to Meridian
Bank), and Hickory Travel Systems. Mr. Harrow is a graduate of George Washington
University School of Government and Business Administration earning his B.B.S.
in 1979.
Scott Tarte. Mr. Tarte is 39 years old. From January 2001 to present,
Mr. Tarte has served as acting CEO of Medidata Solutions, a privately held
technology company specializing in applications that streamline the data
collection process for clinical trials of new drug compounds seeking FDA
approval. In conjunction with the transaction contemplated in this Proxy
Statement, Mr. Tarte has resigned his position at Medidata but remains an
investor in and advisor to that company. From January 1988 to November 1998, Mr.
Tarte was an owner and served as Chief Operating Officer of Travel One. Mr.
Tarte oversaw all corporate operations and finance of the company, and shared
responsibility for strategic planning with Mr. Harrow. In November 1998, Travel
One was sold to the American Express Corporation. Mr. Tarte launched American
Express One, a $3 billion travel division representing a consolidation of the
prior Travel One organization and over $2 billion of legacy American Express
business. In December 1999, Mr. Tarte resigned his position with American
Express but agreed to remain as a paid consultant. Mr. Tarte graduated from the
University of Pennsylvania with a B.A. in 1984 and he received his law degree
from Fordham University in 1987. Mr. Tarte currently serves on the Board of
Directors of the Eaglebrook School, a private preparatory school for boys grades
six through nine in Deerfield, Massachusetts.
A.J. Agarwal. Mr. Agarwal, age 35, is a Senior Managing Director in the
Mergers & Acquisitions Advisory Group for The Blackstone Group. Since joining
Blackstone in 1991, Mr. Agarwal has worked on a variety of mergers and
acquisitions transactions (both in an advisory capacity and as a principal).
Before joining Blackstone, Mr. Agarwal was with Bain & Company. At Bain &
Company, Mr. Agarwal completed a range of strategic consulting assignments in
the information services industry. Mr. Agarwal graduated from Princeton
University magna cum laude and Phi Beta Kappa and received an MBA from Stanford
University Graduate School of Business. He serves as a trustee of Princeton
University's Foundation for Student Communication, the publisher of Business
Today magazine.
Richard Vague. Mr. Vague is 45 years old. In 1999, Mr. Vague co-founded
Juniper Financial, a direct consumer bank with advanced internet and wireless
functionality. Mr. Vague is the Chairman and CEO of Juniper Financial. Prior to
co-founding Juniper Financial, from 1985 to 1999, Mr. Vague was co-founder,
Chairman and CEO of First USA, a credit card company that grew from a virtual
start-up in 1985 to the largest VISA credit card issuer in the world. He also
served as chairman of Paymentech, the merchant payment-processing subsidiary of
First USA and is a former board member of VISA.
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, then Messrs. Harrow and Tarte will
enter into employment agreements (in the forms attached hereto as Annexes V and
-8-
VI) with the Surviving Company pursuant to which Mr. Harrow shall be employed as
the Chairman of the Board of Directors of the Surviving Company, Mr. Tarte shall
be employed as the Vice Chairman of the Board of Directors of the Surviving
Company and as the Chief Executive Officer of each subsidiary of the Surviving
Company, and the Surviving Company and the Surviving Company Board shall use
their best efforts to cause Messrs. Harrow and Tarte to be elected and
re-elected to the Surviving Company Board for the terms of their employment
agreements.
In the event that the Investment Transaction is approved and
consummated, but the Reincorporation is not approved, then Messrs. Harrow and
Tarte will enter into employment agreements with the Company rather than the
Surviving Company, which agreements shall be on terms substantially similar to
those described above.
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, then Messrs. Tarte, Harrow and
Ginsburg and the Surviving Company shall enter into a Stockholders' Agreement
(in the form attached hereto as Annex VIII) pursuant to which, with certain
exceptions, (i) Messrs. Tarte and Harrow shall have the right to designate that
number of individuals as nominees (which nominees shall include Tarte and
Harrow) for election as directors as shall represent a majority of the Surviving
Company Board, (ii) Messrs. Tarte, Harrow and Ginsburg will vote their shares of
the common stock, without par value, of the Surviving Company ("Surviving
Company Common Stock") in favor of the Tarte and Harrow designees and Mr.
Ginsburg, (iii) without the prior written consent of Mr. Ginsburg, for a period
of seven years following the effective date of the Stockholders' Agreement,
Messrs. Tarte and Harrow will agree not to vote any of their shares of Surviving
Company Common Stock in favor of (x) the merger of the Surviving Company, (y)
the sale of substantially all of the Surviving Company's assets, or (z) the sale
of all the shares of Surviving Company Common Stock, in the event that in
connection with such transactions the shares of Surviving Company Common Stock
are valued at less than $2.00 per share, (iv) Messrs. Tarte, Harrow and Ginsburg
will recommend to the Surviving Company Board that it elect Mr. Harrow as the
Chairman of the Board of the Surviving Company, Mr. Ginsburg as the President
and Chief Executive Officer of the Surviving Company, and Mr. Tarte as the Vice
Chairman of the Board of the Surviving Company and as the Chief Executive
Officer of each subsidiary of the Surviving Company and (v) Messrs. Tarte,
Harrow and Ginsburg shall have a right of first refusal with respect to one
another in connection with any sale of the shares of Surviving Company Common
Stock held by them. Following the consummation of both the Investment
Transaction and the Reincorporation, taking into account the other shares of
Surviving Company Common Stock held by each of them, Messrs. Tarte, Harrow and
Ginsburg will collectively own approximately 39.4% of the outstanding shares of
Surviving Company Common Stock. Additionally, if Messrs. Tarte, Harrow and
Ginsburg exercise all of their warrants to purchase shares of Surviving Company
Common Stock and Mr. Harrow exercises the options to purchase shares of Company
Common Stock that he currently holds, they will collectively own approximately
56.4% of the outstanding shares of Surviving Company Common Stock. Furthermore,
following the issuance by the Surviving Company of new stock options to Mr.
Ginsburg at least six months following the cancellation of his existing Option
Agreements (which, as more particularly described under the heading
"Participation by Current Officers in Investment Transaction" in the Investment
Transaction Proposal, is expected to occur immediately prior to the consummation
of the Investment Transaction), if Messrs. Tarte, Harrow and Ginsburg exercise
all of their options and warrants to purchase shares of Surviving Company Common
Stock, they will collectively own approximately 57.9% of the outstanding shares
of Surviving Company Common Stock.
-9-
In the event that the Investment Transaction is approved and
consummated, but the Reincorporation is not approved, then Messrs. Tarte, Harrow
and Ginsburg shall enter into a Stockholders' Agreement with the Company rather
than the Surviving Company, which agreement shall be on terms substantially
similar to those described above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and greater than 10% beneficial owners to file
reports of ownership and changes in ownership of Company Common Stock with the
Securities and Exchange Commission, the American Stock Exchange, and the
Company. Based solely on a review of the copies of Forms 3, 4 and 5 and
amendments thereto furnished to the Company, or written representations that no
Forms 5 were required, the Company believes that for 2000, the Company's
directors, officers and greater than 10% beneficial owners complied with all
Section 16(a) filing requirement, except the initial Form 3 for Mr. Stephen P.
Rolf was not filed on a timely basis.
MEETINGS OF THE BOARD AND COMMITTEES, ATTENDANCE AND FEES
Three meetings of the Company Board were held during 2000. All meetings
were attended by all of the directors who were in office at the time.
For the year 2000, directors not employed by the Company received (i) a
cash annual retainer of $10,000 (or at the director's election, options as
provided below), (ii) a fee of $1,000 for each Board meeting attended in person,
$250 for participation by telephone, and (iii) a stock option award of 10,000
shares with an exercise price equal to the market value on the date of grant,
vesting over a one year period of service as a director, and expiring after a
period of five years. Directors employed by the Company received no additional
compensation for their services as directors of the Company. Members of the
Audit and Compensation Committees who are not employees of the Company received
a fee of $500 for each committee meeting attended, except no such fee was
payable if such meetings were scheduled immediately before or after a Board
meeting. In lieu of all or any of the cash annual retainer, a director could
elect prior to payment of the annual retainer to receive stock options with an
exercise price equal to 33-1/3% of the fair market value on the date of the
option grant, so that the aggregate discount on all such options equaled the
amount of the cash retainer foregone by the director. These options vest over a
one-year period of service as a director and expire after a period of five
years. In the event that the Investment Transaction is approved, future
compensation to directors may change.
Committees of the Board
The Audit Committee is composed of three independent directors and
operates under a written charter adopted by the Board of Directors. A copy of
the Audit Committee Charter is attached as Annex I to this Proxy Statement. The
Audit Committee's functions include assisting the Company Board in fulfilling
its responsibility to oversee management's conduct of the Company's financial
reporting process, including overviewing the financial reports and other
financial information provided by the Company to any governmental or regulatory
body, the public or other users thereof, the Company's systems of internal
accounting and financial controls, and the annual independent audit of the
Company's financial statements. This committee was established in April 1985.
Three formal meetings were held during the last fiscal year by this committee.
This committee currently consists of Messrs. Cohen, Hamilton and Hernes.
-10-
The Company has a Compensation Committee which is appointed by the
Company Board and currently consists of Messrs. Cohen, Hamilton and Hernes. The
primary functions of this committee are to review and determine executive
compensation, and to administer the Company's 1990 Stock Option Plans, 1992
Employee Stock Plan, 1992 Director Stock Plan and 2000 Equity Incentive Plan.
Subject to the provisions of each plan, the committee prescribes the number of
shares and terms of each option and stock grant, and interprets and makes all
other determinations for the administration of each plan. Although no formal
meetings were held during the last fiscal year, all decisions during the fiscal
year were made by written resolutions, in lieu of meetings, consented to by each
member of the committee, or by telephone discussions among committee members.
The Company does not have any nominating committee of the Company
Board, nor committee performing similar functions.
AUDIT COMMITTEE REPORT
The Audit Committee has met and held discussions with management and
the Company's independent accountants and has reviewed and discussed the
Company's audited consolidated financial statements with management and the
Company's independent accountants.
The Audit Committee has also discussed with the Company's independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61 (Codification of Statements on Auditing Standards, AU Section
380).
The Company's independent accountants also provided the Audit Committee
with the written disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
Company's independent accountants that firm's independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the board of directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
Dr. William F. Hamilton - Chairman
Fred Cohen
Seymour Hernes
-11-
EXECUTIVE OFFICERS AND COMPENSATION
The following Summary Compensation Table sets forth the aggregate
amounts paid or accrued by the Company and its subsidiaries during the last
three fiscal years to its Chief Executive Officer and to each of the most highly
compensated executive officers of the Company whose total annual salary and
bonus exceeded $100,000:
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards Options/ Payouts Compensation
Principal Position Year ($) ($) ($) ($) SARs (#) ($) ($) (1)
------------------ ---- --- --- --- --- -------- --- -------
Robert B. Ginsburg
President and CEO 2000 212,180 - - - 175,000 - 6,800
1999 206,000 - - - - - 4,500
1998 200,000 225,000 - - 80,000 - 2,350
Alan I. Goldberg
Executive Officer &
Corporate Secretary 2000 159,135 - - - 162,200 - 5,800
1999 154,500 - - - - - 4,500
1998 150,000 202,500 - - 59,000 - 4,000
Stephen P. Rolf
CFO 2000 120,000 30,000 50,000(2) - 60,000 - 2,000
Lawrence Schan
Former President and
COO of DMS 2000 191,346 - - - - - 1,000
1999 250,000 74,282 - - - - 1,000
1998 250,000 250,000 - - - - 750
-------------------
(1) Consists solely of reimbursement of life insurance premiums and up to $1,000
per year per individual for Company matching 401K Plan contributions in the
form of restricted Company Common Stock, which Plan is available to all
non-union employees of the Company.
(2) Initial employment bonus.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------------------------------------------------
Number of Potential Realizable
Securities % of total Value Assumed Annual
Underlying Options/SARs Rates of Stock Price
Options/ Granted to Exercise or Appreciation
SARs Employees in Base Price Expiration for Option Term
Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------- ----------- ------ ---- ------ -------
Robert B. Ginsburg (1) 175,000 36.8 1.60 7/31/10 147,613 400,925
Alan I. Goldberg (1) 162,200 34.1 1.60 7/31/10 136,816 371,600
Stephen P. Rolf (2) 60,000 12.6 2.00 1/10/06 600 39,440
----------------------
(1) Options are vested, and the exercise price will be adjusted to equal any
lower sale or exercise price of shares sold or options granted to officers
or directors of the Company. In the event that the Investment Transaction is
approved and consummated, Messrs. Ginsburg and Goldberg have agreed to the
cancellation of their options in exchange for the issuance by the Surviving
Company of new options, as more particularly described under the heading
"Participation by Current Officers in Investment Transaction" in the
Investment Transaction Proposal.
(2) Options vest in three annual installments.
-12-
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised In the
Underlying Unexercised Money Options/SARs
Shares Acquired Value Options/SAR FY-End (#) at FY-End ($)
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ------------ ------------------------- -------------------------
Robert B. Ginsburg -- -- 605,032/24,989 0/0
Alan I. Goldberg -- -- 577,811/18,410 0/0
Stephen P. Rolf -- -- 0/60,000 0/0
Lawrence Schan -- -- 0/0 0/0
----------------------
Pursuant to amended employment agreements with a term continuing at
least through December 31, 2002, Mr. Ginsburg is employed as the Company's
President and Chief Executive Officer at a base salary of $212,180 for 2000, and
Mr. Goldberg is employed as the Company's Executive Officer and Corporate
Secretary at a base salary of $159,135 for 2000, in each case with annual
increases of 3%. Mr. Ginsburg receives an annual bonus ranging (i) from 1% of
the Company's pre-tax profit if the Company's annual earnings per share
increases over the prior year by at least 5%, (ii) to 7% of the Company's
pre-tax profit if the Company's annual earnings per share increases over the
prior year by at least 25%. Mr. Goldberg receives an annual bonus ranging (i)
from .75% of the Company's pre-tax profit if the Company's annual earnings per
share increases over the prior year by at least 5%, to (ii) 5.25% of the
Company's pre-tax profit if the Company's annual earnings per share increases
over the prior year by at least 25%. In the event that the proposal contemplated
in the Investment Transaction Proposal is approved and consummated, Mr.
Ginsburg's employment agreement will be amended and restated and Mr. Goldberg's
employment agreement will be amended. (See "Investment Transaction Proposal" for
a description of such amendments.)
Stephen P. Rolf, age 45, became Chief Financial Officer and Treasurer
of the Company in January 2000. Mr. Rolf was employed from 1977 to December 1999
by Hunt Corporation, a New York Stock Exchange listed manufacturer and
distributor of office and graphics products, in various financial capacities,
including Vice President and Controller. Pursuant to an employment agreement
commencing January 10, 2000 and continuing until terminated by either party, Mr.
Rolf is employed as the Company's Chief Financial Officer at a base salary of
$120,000 per year. Mr. Rolf receives an annual bonus ranging (i) from $30,000 if
the Company's pre-tax profit is at least 5% of sales, to (ii) $100,000 if the
Company's pre-tax profit is a least 12% of sales. A minimum annual bonus of
$30,000 was guaranteed for 2000.
Lawrence Schan, age 53, served as the President and Chief Operating
Officer of DMS Store Fixtures, which was acquired by the Company in December
1997, for a period of over five years, until his resignation in January, 2001.
Pursuant to his amended employment agreement, no additional compensation was
payable to Mr. Schan for periods following the date of his resignation. DMS
provides store fixtures and point-of-purchase displays to national retailers.
In the event of termination of employment without cause by the Company,
each of Messrs. Ginsburg and Goldberg is entitled to all compensation payable
under his respective employment agreement over the remaining term and the
economic benefit of all stock options as if his employment agreement were not
-13-
terminated, and Mr. Rolf is entitled to continuation of his base salary for a
period of six months after termination.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors, composed of the
Company's three non-employee directors, reviews and recommends to the Company
Board executive compensation and administers the Company's stock option and
award plans. The objective of the Company's compensation program is to build
shareholder value by attracting and retaining key executives. The Committee
establishes compensation programs which it believes are reasonable and
competitive with similarly situated companies. The components of the Company's
executive compensation program are base salary, bonus plans and stock options
and awards.
Base Salary. Base salary is designed to provide each executive with a
fixed amount of annual compensation that is competitive with the marketplace.
Base salary is specified in employment agreements ranging up to 5 years in
duration and is subject to review at the end of the contract term. Salaries may
also be reviewed and increased during the term at the discretion of the Company
Board. For 2000, the base salaries of the Company's Chief Executive Officer and
Executive Officer were increased by 3% in accordance with their respective
employment agreements, as described above under the heading "Executive Officers
and Compensation".
Bonus Plans. The Company establishes bonus plans intended to encourage
improved operating and financial results. Bonus plans are specified in
employment agreements ranging up to 5 years in duration and are subject to
review at the end of the contract term. The 2000 objectives for all executive
officers under their bonus plans were based on the Company's operating and
financial results measured by the Company's or its subsidiaries' income, and the
Company's Chief Financial Officer had an initial employment bonus and guaranteed
minimum bonus for 2000. The Chief Executive Officer's 2000 plan was linked to
operating and financial results by providing for a bonus based on the Company's
annual earnings per share increase in 2000 over 1999, and therefore no bonus was
paid for 2000.
Stock Options and Awards. The long-term component of the Company's
incentive compensation program consists of equity-based grants which have been
in the form of stock options and restricted stock awards. These grants are
designed to create a mutuality of interest with shareholders by motivating the
CEO and the other executive officers and key personnel to manage the Company's
business so that the shareholders' investment will grow in value over time. The
Committee's policy has been to base individual awards on an evaluation of an
executive's performance and the overall performance of the Company. The
Committee may also consider the amount of an individual's outstanding or
previously granted options or shares in determining the size of the grant. Stock
options were granted to three of the Company's executive officers in 2000, based
on the hiring of a new Chief Financial Officer and the replacement of stock
options which expired in 2000 with similar options for the Chief Executive
Officer and another executive officer.
Tax Deductibility. With respect to qualifying compensation paid to
executive officers under Section 162(m) of the Internal Revenue Code, the
Company does not expect to have any amount of compensation exceeding the $1
million annual limitation.
Fred Cohen - Chairman
Dr. William F. Hamilton
Seymour Hernes
-14-
Compensation Committee Interlocks and Insider Participation
For 2000, Messrs. Cohen, Hamilton and Hernes served as the Compensation
Committee of the Board of Directors. Messrs. Cohen and Hernes were employees of
the Company prior to December 31, 1990, but have not been employees since
January 1, 1991.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return on
Company Common Stock on a yearly basis over the five-year period ended December
31, 2000 and compares this return with (i) the American Stock Exchange Market
Value Index, and (ii) the 672 public companies listed in the Company's Standard
Industrial Code 7389 - Business Services Not Elsewhere Classified. The graph
assumes that the value of the investment in Company Common Stock and each index
was $100 on December 31, 1995 and that all dividends were reinvested.
500 ---------------------------------------------------------------------------
*
450 ---------------------------------------------------------------------------
400 ---------------------------------------------------------------------------
350 ---------------------------------------------------------------------------
*
300 ---------------------------------------------------------------------------
*
250 ---------------------------------------------------------------------------
*
200 ---------------------------------------------------------------------------
@ @
150 ---------------------------------------------------------------------------
# #@ @ #
@
100 *#@------------------------------------------------------------------------
#
50 ---------------------------------------------------------------------------
*
#
0 ---------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
* Marlton Technologies, Inc.
# SIC Code
@ American Stock Exchange Index
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Marlton Technologies, Inc. 100.00 295.24 457.14 314.29 214.29 38.10
SIC Code 100.00 114.62 120.01 89.17 126.72 28.60
American Stock Exchange Index 100.00 105.52 126.97 125.25 156.15 154.23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company previously leased its principal facility in Philadelphia
from an independent third party pursuant to a lease expiring October 1, 2004,
with renewal options at a rental equal to fair market value. The triple net rent
was $2.44 per square foot until October 1, 1999, $ 2.54 until October 1, 2001,
$2.61 until October 1, 2002, $2.60 until October 1, 2003 and $2.70 until October
1, 2004. In May 1999, 2828 Partnership L.P., a limited partnership whose general
partners are Stanley Ginsburg and Ira Ingerman, purchased the Philadelphia
facility, and entered into a new lease with the Company (the "New Lease"). The
New Lease provides for a term of 20 years, an option for the Company to
terminate after 10 years subject to the landlord's ability to relet the
premises, triple net rent for the first 10 years at a rate of $2.59 per foot and
thereafter at a formula rate based on the hypothetical refinanced mortgage debt,
plus $.74 per square foot. Upon a change in control of the Company, the rent
will be reset at then fair market value if greater than the existing base rent.
Following this transaction, the Company built a 15,800 square foot addition onto
the facility to accommodate its need for additional office space for its
internal needs and to relocate the DMS Store Fixtures operations into this
location, at a total cost of approximately $1,500,000. Upon completion of this
addition, the landlord reimbursed the Company for its actual construction costs,
less certain financing and closing costs, and the triple net rent was increased
by $13,666.75 per month for the remainder of the first 10 years, reflecting the
additional debt service and costs incurred by the landlord to finance the
addition.
DMS Store Fixtures, a Company subsidiary, leased its principal facility
in King of Prussia, Pennsylvania from Ingerman-Ginsburg Partnership, a general
partnership owned and controlled by Stanley Ginsburg and Ira Ingerman, pursuant
to a Lease Agreement, dated March, 1984, as amended as of January 1, 1992,
-15-
January 1, 1995 and July 1, 1996 (collectively, the "Lease"). The premises
leased by DMS consisted of 60,000 square feet of rentable space and constituted
one-half of the total rentable square feet of a building owned by
Ingerman-Ginsburg Partnership. The other half of the building was occupied by a
third party unrelated to either DMS, or Messrs. Ginsburg or Ingerman. DMS paid
rent in the amount of $3.00 per square foot (triple net); provided that, in the
event that the rental with respect to the portion of the building rented to the
unrelated third party was increased after June 30, 1999 to more than $3.00 per
square foot (triple net), the rental paid by DMS would automatically be
increased to that amount, with a maximum of $4.00 per square foot. The term of
the Lease was to expire on December 31, 2002, subject to a five-year renewal
option at a rental equal to fair market value. DMS and the Ingerman-Ginsburg
Partnership mutually agreed to terminate the Lease effective March 31, 2000, at
which time the DMS operations were consolidated into the Company's Philadelphia
facility.
In connection with the Company's purchase of DMS Store Fixtures on
December 31, 1997, the Company entered into five-year employment agreements with
Lawrence Schan, Ira Ingerman and Stanley Ginsburg (collectively, the "DMS
Principals"). During 2000, these employment agreements were amended to reduce
the salaries payable to the DMS Principals, and in the first quarter of 2001,
the employment of Mr. Schan was terminated by his resignation and the employment
of Messrs. Ingerman and Stanley Ginsburg was terminated by the mutual consent of
the respective DMS Principal and the Company.
Messrs. Lawrence Schan, Stanley Ginsburg and Ira Ingerman are listed
under "Security Ownership" as 5% or more beneficial owners of Company Common
Stock, and Stanley Ginsburg is the father of Robert B. Ginsburg, the President
and CEO of the Company.
In addition, Messrs. Robert Ginsburg and Goldberg have certain
interests in the Investment Transaction Proposal, the Reincorporation Proposal
and the 2001 Equity Incentive Plan Proposal as more particularly described
therein.
-16-
PROPOSAL NO. 2
APPROVAL OF INVESTMENT TRANSACTION
At the Annual Meeting, shareholders will be asked to approve the
transactions contemplated by a Subscription Agreement (the "Purchasers'
Subscription Agreement") by and among the Company, Newco, Scott Tarte ("Tarte")
and Jeffrey Harrow ("Harrow") dated as of August 23, 2001, attached hereto as
Annex II, and a Subscription Agreement (the "Officers' Subscription Agreement"
and together with the Purchasers' Subscription Agreement, the "Subscription
Agreements") by and among the Company, Newco, Robert B. Ginsburg, a member of
the Company Board and the current President and Chief Executive Officer of the
Company ("Ginsburg"), and Alan I. Goldberg, a member of the Company Board and
the current Executive Officer and Corporate Secretary of the Company ("Goldberg"
and together with Tarte, Harrow and Ginsburg, the "Investors") dated as of
August 23, 2001, attached hereto as Annex III, as the result of which (i)
5,300,000 shares Surviving Company Common Stock will be issued to the Investors,
and (ii) warrants (the "Warrants") to purchase up to 5,300,000 shares of the
Surviving Company Common Stock will be issued to the Investors and will be
exercisable (collectively, the "Investment Transaction"), all as set forth in
the Subscription Agreements and related agreements. The Company Board
established an independent committee which has evaluated, approved, and
recommended shareholder approval of the Investment Transaction, as more
particularly described under the heading "Independent Committee and Its
Advisors" in this Investment Transaction Proposal.
In the event that the Investment Transaction is approved, but the
Reincorporation is not approved, instead of the Surviving Company being the
issuer, the Company shall be the issuer of the stock and warrants pursuant to
the Subscription Agreements.
Proposed Transactions
Subscription Agreements
The Subscription Agreements provide that the Investors shall
collectively purchase for $2,650,000: (i) 5,300,000 shares of Surviving Company
Common Stock, and (ii) Warrants to purchase up to 5,300,000 shares of Surviving
Company Common Stock exercisable for a period of ten (10) years after the
closing date of the Subscription Agreements (the "Closing Date"), at an exercise
price of $0.50 per share, which exercise price will be adjusted upon the
occurrence of any subsequent stock splits, dividends, recapitalizations or
similar events. The proposed form of the Warrants is attached as Annex IV.
Of the Surviving Company Common Stock and Warrants to be purchased by
the Investors, Tarte will purchase 2,000,000 shares and Warrants to purchase up
to 2,000,000 shares, Harrow will purchase 2,000,000 shares and Warrants to
purchase up to 2,000,000 shares, Ginsburg will purchase 1,000,000 shares and
Warrants to purchase up to 1,000,000 shares, and Goldberg will purchase 300,000
shares and Warrants to purchase up to 300,000 shares.
The closing of the transactions contemplated by the Subscription
Agreements is contingent upon shareholder approval, as more particularly
described in the Subscription Agreements and under the headings "The AMEX 20%
Rule" and "Required Vote" in this Investment Transaction Proposal.
-17-
Employment Agreements
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, then Harrow and Tarte will enter
into employment agreements with the Surviving Company pursuant to which (i)
Harrow shall be employed as the Chairman of the Board of Directors of Surviving
Company, (ii) Tarte shall be employed as the Vice Chairman of the Board of
Directors of the Surviving Company and as the Chief Executive Officer of each
subsidiary of the Surviving Company, (iii) the Surviving Company and the
Surviving Company Board shall use their best efforts to cause Harrow and Tarte
to be elected and re-elected to the Surviving Company Board for the terms of
their employment agreements, and (iv) each of Tarte and Harrow shall receive an
annual base salary of $218,445 and a bonus, which base salary and bonus for each
of Tarte and Harrow shall be the same as Ginsburg's (excluding Ginsburg's 2001
bonus). The proposed forms of the employment agreements for Harrow and Tarte are
attached as Annexes V and VI.
In the event that the Investment Transaction is approved and
consummated, but the Reincorporation is not approved, then Harrow and Tarte will
enter into employment agreements with the Company rather than the Surviving
Company, which agreements shall be on terms substantially similar to those
described above.
In the event that the Investment Transaction and the Reincorporation
are approved and consummated, then Ginsburg will enter into an amended and
restated employment agreement with the Surviving Company pursuant to which his
base salary and bonus (excluding his 2001 bonus) will be the same as the base
salary and bonus for each of Tarte and Harrow and which will otherwise contain
substantially the same terms and provisions as his current employment agreement
with the Company including his current base salary, his continued employment as
the President and Chief Executive Officer of the Surviving Company and the
provision that the Surviving Company and the Surviving Company Board shall
continue to use their best efforts to cause Ginsburg to be elected and
re-elected to the Surviving Company Board. (See "Election of Directors Proposal"
for a description of Ginsburg's current employment agreement with the Company.)
The proposed form of the amended and restated employment agreement for Ginsburg
is attached as Annex VII.
In the event that the Investment Transaction is approved and
consummated, but the Reincorporation Proposal is not approved, then Ginsburg
will enter into an amended and restated employment agreement with the Company
rather than the Surviving Company, which agreement shall be on terms
substantially similar to those described above.
In the event that both the Investment Transaction Proposal and the
Reincorporation Proposal are approved and consummated, Goldberg's employment
agreement will be amended to change his title to General Counsel and Corporate
Secretary and to provide for termination by the Surviving Company with 365 days
prior written notice, but in no event prior to December 31, 2002.
In the event that the Investment Transaction is approved and
consummated, but the Reincorporation is not approved, then Goldberg's amended
employment agreement shall be with the Company rather than the Surviving Company
and the amendment shall be on terms substantially similar to those described
above.
-18-
Stockholders' Agreement
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, then Tarte, Harrow, Ginsburg and
the Surviving Company shall enter into a Stockholders' Agreement pursuant to
which, with certain exceptions, (i) Tarte and Harrow shall have the right to
designate that number of individuals as nominees (which nominees shall include
Tarte and Harrow) for election as directors as shall represent a majority of the
Surviving Company Board, (ii) Tarte, Harrow and Ginsburg will vote their shares
of Surviving Company Common in favor of the Tarte and Harrow designees and
Ginsburg, (iii) without the prior written consent of Ginsburg, for a period of
seven years following the effective date of the Stockholders' Agreement, Tarte
and Harrow will agree not to vote any of their shares of Surviving Company
Common Stock in favor of (x) the merger of the Surviving Company, (y) the sale
of substantially all of the Surviving Company's assets, or (z) the sale of all
the shares of Surviving Company Common Stock, in the event that in connection
with such transaction the shares of Surviving Company Common Stock are valued at
less than $2.00 per share, (iv) Tarte, Harrow and Ginsburg will recommend to the
Surviving Company Board that it elect Harrow as the Chairman of the Board of the
Surviving Company, Ginsburg as the President and Chief Executive Officer of the
Surviving Company and Tarte as the Vice Chairman of the Board of the Surviving
Company and as the Chief Executive Officer of each subsidiary of the Surviving
Company and (v) Tarte, Harrow and Ginsburg shall have a right of first refusal
with respect to one another in connection with any sale of the shares of
Surviving Company Common Stock held by them. Following the consummation of both
the Investment Transaction and the Reincorporation, taking into account the
other shares of Surviving Company Common Stock held by each of them, Tarte,
Harrow and Ginsburg will collectively own approximately 39.4% of the outstanding
shares of Surviving Company Common Stock. Additionally, if Tarte, Harrow and
Ginsburg exercise all of their warrants to purchase shares of Surviving Company
Common Stock and Harrow exercises all of the options to purchase shares of
Company Common Stock that he currently holds, they will collectively own
approximately 56.4% of the outstanding shares of Surviving Company Common Stock.
Furthermore, following the issuance by the Surviving Company of new stock
options to Ginsburg at least six months following the cancellation of his
existing Option Agreements (which, as more particularly described under the
heading "Participation by Current Officers in Investment Transaction" in this
Investment Transaction Proposal, is expected to occur immediately prior to the
consummation of the Investment Transaction), if Tarte, Harrow and Ginsburg
exercise all of their options and warrants to purchase shares of Surviving
Company Common Stock, they will collectively own approximately 57.9% of the
outstanding shares of Surviving Company Common Stock. The proposed form of the
Stockholders' Agreement is attached as Annex VIII.
In the event that the Investment Transaction is approved, but the
Reincorporation is not approved, then Tarte, Harrow, Ginsburg and the Company
shall enter into a Stockholders' Agreement with the Company rather than the
Surviving Company, which agreement shall be on terms substantially similar to
those described above.
Registration Rights
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, the Investors will enter into a
registration rights agreement with the Surviving Company pursuant to which the
Investors will have the right to demand that Surviving Company file with and use
its reasonable best efforts to have declared effective by the Securities and
Exchange Commission up to two registration statements with respect to all or
part of (i) the Surviving Company Common Stock purchased by the Investors
-19-
pursuant to the Subscription Agreements and (ii) the shares of Surviving Company
Common Stock issued to and held by the Investors as a result of the exercise of
the Warrants purchased by the Investors pursuant to the Subscription Agreements
(the "Demand Registration Rights"). The Investors will also have piggyback
registration rights with respect to any registration by the Surviving Company of
its securities on a form of registration statement available for sales to the
general public, subject to restrictions which an underwriter might impose in
connection with such sales (the "Piggyback Registration Rights"). The Demand
Registration Rights will be exercisable by the Investors at any time subsequent
to 120 days after the Closing Date and prior to the tenth anniversary of the
Closing Date and the Piggyback Registration Rights will be exercisable by the
Investors at any time after the Closing Date and prior to the tenth anniversary
of the Closing Date. The proposed form of the registration rights agreement is
attached as Annex IX.
In the event that the Investment Transaction is approved, but the
Reincorporation Proposal is not approved, the Investors will enter into a
registration rights agreement with the Company rather than the Surviving
Company, which agreement shall be on terms substantially similar to those
described above.
The AMEX 20% Rule
In the event that both the Investment Transaction and the
Reincorporation are approved and consummated, Surviving Company Common Stock
will be listed on the American Stock Exchange ("AMEX"), where Company Common
Stock is currently listed. The AMEX rules require shareholder approval prior to
the issuance of securities under certain circumstances, including in connection
with a transaction (other than a public offering) involving the sale or issuance
by a company of common stock (or securities convertible into or exercisable for
common stock) equal to 20% or more of the presently outstanding stock for less
than the greater of book value or market value of the stock before such issuance
(the "AMEX 20% Rule"). Pursuant to the Investment Transaction, Surviving Company
would sell 5,300,000 shares of Surviving Company Common Stock at a price less
than book value and, therefore, less than the greater of book or market value.
This issuance would exceed 20% of the outstanding Surviving Company Common
Stock. In the event that the Investment Transaction is approved and consummated,
but the Reincorporation is not approved, the Company Common Stock will continue
to be listed on AMEX. Pursuant to the Investment Transaction, the Company would
sell 5,300,000 shares of Company Common Stock at a price less than book value
and, therefore, less than the greater of book or market value. This issuance
would exceed 20% of the outstanding Company Common Stock. The Company is seeking
shareholder approval for the Investment Transaction so that the Subscription
Agreements may be consummated in compliance with the AMEX 20% Rule.
Participation by Current Officers in Investment Transaction
Ginsburg and Goldberg are participating in the Investment Transaction
in order to provide the Company with additional capital and as evidence of the
continued commitment of existing management to the Company.
The holders of Company Common Stock should be aware that Ginsburg and
Goldberg have certain interests that differ from the unaffiliated holders of
Company Common Stock.
-20-
Ginsburg and Goldberg are parties to existing Stock Option Agreements
with the Company (the "Option Agreements"), pursuant to which they were granted
incentive and non-qualified stock options to purchase shares of Company Common
Stock at exercise prices of $1.60 to $4.88 per share (the "Option Prices").
Since their issuance, substantially all of the options evidenced by the Option
Agreements have become fully vested and immediately exercisable. The terms of
these Option Agreements provide that the Option Prices will be reduced if the
Company Board approves a transaction in which shares of Company Common Stock are
subsequently issued to officers or directors of the Company at a price lower
than the Option Prices. In that event, the Option Prices will be reduced to the
purchase price of such newly issued shares. The completion of the Investment
Transaction would trigger the Option Price adjustment described above.
The Company has determined that a reduction in the exercise price
payable under the existing Option Agreements could result in adverse accounting
treatment for the Company. Therefore, the Company has asked Ginsburg and
Goldberg, and they have agreed, to cancel all the existing Option Agreements
immediately prior to consummation of the Investment Transaction. In exchange for
the cancellation of the existing Option Agreements, the Company has agreed to
issue new stock options to Ginsburg and Goldberg, in each case with respect to
the same number of shares and same vesting schedules as were subject to their
respective Option Agreements. These new stock options will be issued during the
thirty day period commencing at least six months following the cancellation of
the Option Agreements, with the precise date of the issuance determined by the
Surviving Company Board. In each case, the exercise price of the new options
will be equal to the closing price of the Surviving Company Common Stock on the
new grant date, but in no event less than $0.50. Finally, in each case, the
Surviving Company's obligation to issue the new options is subject to the
recipient's continued employment by the Surviving Company through the date of
the new issuance, with certain exceptions for termination as a result of death
or disability.
If the 2001 Equity Incentive Plan is not approved and the Surviving
Company and Ginsburg and Goldberg do not subsequently agree on a mutually
acceptable alternative to place the Surviving Company and the individuals in the
relative same economic position, the Option Agreements will not be canceled and
Ginsburg and Goldberg will not receive new stock options. In that case, the
Option Prices of their existing options will be reduced in accordance with the
terms of the Option Agreements upon completion of the Investment Transaction and
the Surviving Company may become subject to adverse accounting treatment.
If the Investment Transaction is approved, but the Reincorporation
Proposal is not approved, the new stock options will be issued by the Company
instead of the Surviving Company, but will otherwise contain terms substantially
similar to those described above.
Ginsburg and Goldberg also have other interests that differ from the
unaffiliated holders of Company Common Stock, as more particularly described
under the headings "Employment Agreements" and "Stockholders' Agreement" in this
Investment Transaction Proposal.
Effect on Existing Shareholders
Upon completion of the Investment Transaction and the Reincorporation,
Tarte and Harrow will collectively own 31.0% of the outstanding shares of
Surviving Company Common Stock, Ginsburg will 8.4% of the outstanding shares of
Surviving Company Common Stock, and Goldberg will own 3.1% of the outstanding
shares of Surviving Company Common Stock, including other shares of Surviving
Company Common Stock held by Harrow, Ginsburg and Goldberg. Additionally, if the
-21-
Investors exercise all of their Warrants for the purchase of up to an additional
5,300,000 shares of Surviving Company Common Stock and Harrow exercises the
options to purchase shares of Company Common Stock that he currently holds, they
will collectively own approximately 59.3% of the outstanding shares of Surviving
Company Common Stock, with Tarte and Harrow collectively owning approximately
44.0% of the issued and outstanding shares of Surviving Company Common Stock,
Ginsburg owning approximately 11.4% of the issued and outstanding shares of
Surviving Company Common Stock, and Goldberg owning approximately 3.9% of the
issued and outstanding shares of Surviving Company Common Stock. Furthermore,
following the issuance by the Surviving Company of new stock options to Ginsburg
and Goldberg at least six months following the cancellation of their existing
Option Agreements (which, as more particularly described under the heading
"Participation by Current Officers in Investment Transaction" in this Investment
Transaction Proposal, is expected to occur immediately prior to the consummation
of the Investment Transaction), if the Investors exercise all of their options
and Warrants to purchase shares of Surviving Company Common Stock, they will
collectively own approximately 61.8% of the outstanding shares of Surviving
Company Common Stock, with Tarte and Harrow collectively owning approximately
41.3% of the issued and outstanding shares of Surviving Company Common Stock,
Ginsburg owning approximately 13.9% of the issued and outstanding shares of
Surviving Company Common Stock, and Goldberg owning approximately 6.6% of the
issued and outstanding shares of Surviving Company Common Stock. In addition,
Stanley Ginsburg, Robert Ginsburg's father, currently beneficially owns 772,492
shares of Company Common Stock.
Additionally, upon the approval and consummation of the Investment
Transaction and the Reincorporation, Tarte and Harrow will have the right to
designate nominees (which nominees shall include Tarte and Harrow) for a
majority of the Surviving Company Board. Ginsburg will also be nominated for
election to the Surviving Company Board, and Tarte, Harrow and Ginsburg will
vote in favor of such nominees. Consequently, as a result of the Investment
Transaction, the ownership interest of the existing shareholders of the Company
will be substantially diluted and Tarte and Harrow will be in a position to
effectively control the management and policies of the Surviving Company. In
addition, Tarte, Harrow and Ginsburg will collectively own 39.4% of the
outstanding shares of Surviving Company Common Stock and will have the right to
acquire additional shares of Surviving Company Common Stock which, if exercised,
will result in their owning more than a majority of the issued and outstanding
Surviving Company Common Stock.
If the Investment Transaction is approved and consummated, but the
Reincorporation is not approved, the same effects will be realized, but the
ownership will be of shares of Company Common Stock and the designations will be
for nominees to the Company Board.
Independent Committee and Its Advisors
A special committee of the Company Board, consisting of the Company's
three non-employee directors (the "Independent Committee"), was formed to
investigate, consider and evaluate the Investment Transaction. In connection
with its evaluation of the Investment Transaction, the Independent Committee
engaged McCausland, Keen & Buckman, a professional corporation, which was not
previously affiliated with the Company or the Company's management, to serve as
the independent legal advisor to the Independent Committee. Additionally, as
required by the Subscription Agreements, the Independent Committee engaged
Gruntal & Co., L.L.C. to evaluate whether the consideration to be paid by the
Investors for the Surviving Company Common Stock and the Warrants is fair from a
financial point of view to the shareholders of the Company. The Independent
Committee approved the Subscription Agreements, the Investment Transaction
and the agreement between the Company and Ginsburg and Goldberg pursuant to
-22-
which the Option Agreements will be canceled (which, as more particularly
described under the heading "Participation by Current Officers in Investment
Transaction" in the Investment Transaction Proposal, is expected to occur
immediately prior to the consummation of the Investment Transaction) and
Ginsburg and Goldberg will be issued new options to purchase Surviving Company
Common Stock.
The Independent Committee's Consideration of the Investment Transaction
The Independent Committee has recommended to the Company Board that the
Subscription Agreements and the Investment Transaction be approved, and based
upon that recommendation, the Company Board has granted its approval. In
approving the Subscription Agreements and the Investment Transaction and
determining them to be in the best interests of the Company and its
shareholders, the Independent Committee considered a number of factors,
including the following:
o The benefit to the Surviving Company and its shareholders resulting
from the addition of Tarte and Harrow to the Surviving Company's
senior management.
o The use of proceeds from the Investment Transaction to pay down the
Surviving Company's debt and enhance its balance sheet.
o The participation of Ginsburg and Goldberg in the Investment
Transaction as evidence of the continued commitment of existing
management to the Surviving Company.
o The obtaining of a fairness opinion to the effect that consideration
to be paid by the Investors for the Surviving Company Common Stock
and the Warrants is fair from a financial point of view to the
shareholders of the Company (except for standard qualifications).
This requirement was fulfilled by the delivery of a fairness opinion
to the Company by Gruntal & Co., L.L.C. dated September 7, 2001.
o The resulting ability of Tarte and Harrow to effectively control the
management and policies of the Surviving Company.
o The interests of Ginsburg and Goldberg in the Investment Transaction
which differ from those of the unaffiliated holders of Company
Common Stock.
o The effects of the Investment Transaction on the unaffiliated
holders of Company Common Stock.
Required Vote
Approval of the Investment Transaction requires the affirmative vote of
the holders of a majority of Company Common Stock present and entitled to vote
thereon at the Annual Meeting. A vote for the Investment Transaction will
constitute specific shareholder approval of the Subscription Agreements and all
other agreements and transactions related to the Investment Transaction. All of
the directors of the Company, who together directly own 384,384 shares of
Company Common Stock (representing 5.0%), have informed the Company that they
intend to cause all such shares to be voted for the approval of the Investment
Transaction.
-23-
Recommendation of the Independent Committee of the Board of Directors
The Independent Committee of the Company's Board of Directors
unanimously recommends a vote FOR Proposal No. 2.
-24-
PROPOSAL NO. 3
PROPOSAL TO EFFECT A MERGER TO CHANGE THE STATE OF INCORPORATION
OF THE COMPANY TO PENNSYLVANIA
In the event that this proposal is approved and consummated, the
Company's state of incorporation will change from New Jersey to Pennsylvania by
means of the merger of the Company with and into Newco (the "Reincorporation
Merger") pursuant to the Agreement and Plan of Merger between the Company and
Newco (the "Merger Agreement") attached hereto as Annex X, as a result of which
the Articles of Incorporation of Newco (the "New Articles") attached hereto as
Annex XI, and the Bylaws of Newco (the "New Bylaws") attached hereto as Annex
XII will become the articles and the bylaws of the Surviving Company and the
Surviving Company of the Reincorporation Merger would then change its name to
"Marlton Technologies, Inc." (collectively, the transactions contemplated by the
Merger Agreement are referred to as the "Reincorporation").
Principal Reasons for the Reincorporation Proposal
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the Company's state of
incorporation from New Jersey to Pennsylvania. At the time of the Company's
incorporation in New Jersey in 1949, the Company's business was based in New
Jersey, and the New Jersey Business Corporation Act (the "New Jersey BCA") was
adequate and appropriate for the conduct of the Company's New Jersey-based
business. Currently, the Company's executive offices are located in
Philadelphia, Pennsylvania and it has not had offices in New Jersey for many
years. Accordingly, the changing of the Company's state of incorporation to
Pennsylvania will conform its legal residence to its actual residence. The
adoption of Pennsylvania's new Business Corporation Law of 1988, as amended (the
"Pennsylvania BCL"), has afforded Pennsylvania-domiciled corporations
significant operating flexibility and has brought Pennsylvania corporate law in
line with the modern corporate laws of other states.
The Board of Directors of the Company believes that, in view of the
location of the Company's principal executive offices in Pennsylvania, and the
modernization of the Pennsylvania BCL in recent years, the interests of the
Company will be better served by changing the Company's state of incorporation
from New Jersey to Pennsylvania. It should be noted, however, that shareholders
in some instances have fewer rights and hence less protection under the
Pennsylvania BCL than under the New Jersey BCA. See the discussion under the
heading "Comparison of Shareholders' Rights under New Jersey BCA and
Pennsylvania BCL," below.
On August 22, 2001, the Company Board approved, subject to shareholder
approval, the Reincorporation Proposal in order to change the Company's state of
incorporation from New Jersey to Pennsylvania. If the shareholders approve the
Reincorporation Proposal, following its consummation, the Surviving Company will
continue to operate the Company's business in the same manner as the Company
operates its business currently. A consequence of this Merger will be a change
in the law applicable to the Company's corporate affairs, from the New Jersey
BCA to the Pennsylvania BCL, which will also result in certain differences in
the rights of the Company's shareholders. See "Comparison of Shareholders'
Rights under New Jersey BCA and Pennsylvania BCL," below.
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences between the New
Jersey BCA and the Pennsylvania BCL. This summary does not purport to be a
complete description of the Reincorporation Proposal or the differences between
-25-
shareholders' rights under the New Jersey BCA and the Pennsylvania BCL and is
qualified in its entirety by reference to the Merger Agreement, the New Articles
and the New Bylaws. Copies of the Company's Restated Certificate of
Incorporation, as amended (the "Company Certificate"), and Bylaws (the "Company
Bylaws") are available for inspection at the Company's principal office, and
copies will be sent to shareholders on request, without charge.
Approval of the Reincorporation by the Company's shareholders will
constitute approval of the Reincorporation Merger and the Merger Agreement.
Pursuant to the terms of the Merger Agreement, the New Articles and New Bylaws
will replace the Company Certificate and Company Bylaws as the charter documents
affecting corporate governance and shareholders' rights. One key difference
between the charter documents is that the New Articles do not provide for a
staggered Board of Directors, while the Company Certificate does. Therefore, if
the Reincorporation Merger is approved and consummated, the Board will cease to
be staggered and all directors will stand for re-election annually. Another
important difference between the charter documents is that the Company
Certificate grants cumulative voting rights in the election of directors, while
the New Articles specifically provide that cumulative voting shall not be used
in the election of directors. Therefore, if the Reincorporation Merger is
approved and consummated, the holders of a majority of Surviving Company Common
Stock will have the ability to elect the entire Board. If the Investment
Transaction is also approved, upon consummation of the Investment Transaction,
Tarte, Harrow and Ginsburg will have the ability to elect the entire Surviving
Company Board if they exercise all of their options and Warrants. For a
description of these and other differences between the Company Certificate and
Company Bylaws and the New Articles and New Bylaws, see "Comparison of Certain
Charter Document Provisions," below.
The approval of the Reincorporation Proposal will affect certain rights
of the Company's shareholders. Accordingly, shareholders are urged to carefully
read this Proxy Statement and the Annexes hereto.
Principal Features of the Reincorporation Proposal
At the Effective Time (as defined in the Merger Agreement) of the
Reincorporation Merger, the separate existence of the Company will cease and the
Surviving Company, to the extent permitted by law, will succeed to all business,
properties, assets and liabilities of the Company. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time will, by
virtue of the Reincorporation Merger, be converted into one share of common
stock, without par value, of Surviving Company ("Surviving Company Common
Stock"). At the Effective Time, certificates which immediately prior to the
Effective Time represented Company Common Stock, including Company Common Stock
held in the treasury of the Company, will be deemed for all purposes to
represent the same number of shares of Surviving Company Common Stock. IT WILL
NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF THE SURVIVING COMPANY.
Approval of the Reincorporation will not result in any change in the
business, management, assets or liabilities of the Company, except for the
elimination of a staggered board and cumulative voting in the election of
directors. Upon completion of the Reincorporation Merger, the name of the
Surviving Company will be changed to "Marlton Technologies, Inc." In the event
that Fred Cohen and Dr. William F. Hamilton are elected as directors at the
Annual Meeting pursuant to the Election of Directors Proposal and both the
Investment Transaction Proposal and this Reincorporation Proposal are approved,
-26-
Dr. William F. Hamilton and Seymour Hernes have agreed to resign as directors of
the Company Board. Immediately prior to the Reincorporation Merger the sole
director of Newco shall (i) approve an increase in the size of Newco's board of
directors to seven directors, (ii) appoint Robert Ginsburg, Jeffrey Harrow,
Scott Tarte, Alan I. Goldberg, A.J. Agarwal, Richard Vague and Fred Cohen to
Newco's board of directors and (iii) resign as a director of Newco. The members
of the Newco Board immediately prior to the Reincorporation Merger shall
continue as the members of the Surviving Company Board immediately following the
Reincorporation Merger. In such event, the Surviving Company Board members
immediately following the Reincorporation Merger shall consist of Robert B.
Ginsburg, Jeffrey Harrow, Scott Tarte, Alan I. Goldberg, A.J. Agarwal, Richard
Vague and Fred Cohen. Additionally, as the Newco Board will not be staggered
prior to the Reincorporation Merger, the Surviving Company Board will not be
staggered and, as such, all directors will stand for re-election annually. The
officers of Newco immediately prior to the Reincorporation Merger shall be the
officers of the Surviving Company immediately following the Reincorporation
Merger, along with Jeffrey Harrow who shall be the first Chairman of the Board,
and Scott Tarte who shall be the first Vice Chairman of the Board. Following the
consummation of the Reincorporation Merger, Surviving Company Common Stock will
be listed on the American Stock Exchange ("AMEX"), where Company Common Stock is
currently listed.
After the Reincorporation Merger, the Surviving Company will file with
the Securities and Exchange Commission (the "SEC") and provide to its
shareholders the same type of information that the Company has previously filed
and provided. Shareholders whose Company Common Stock is fully tradable before
the Reincorporation Merger will hold freely tradable Surviving Company Common
Stock. Shareholders holding restricted stock of the Company will be subject to
the same restrictions on transfer as those to which their present shares of
stock in the Company are subject. For purposes of computing compliance with the
holding period of SEC Rule 144, shareholders will be deemed to have acquired
their shares in the Surviving Company on the date they acquired their shares in
the Company. In summary, the Surviving Company and its shareholders will be in
the same respective position under the federal securities laws after the
Reincorporation Merger as were the Company and its shareholders prior to the
Reincorporation Merger.
Pursuant to the terms of the Merger Agreement, each option and warrant
to purchase Company Common Stock outstanding immediately prior to the Effective
Time of the Reincorporation Merger will become an option or warrant to purchase
Surviving Company Common Stock, subject to the same terms and conditions as set
forth in any agreement pursuant to which such option or warrant was granted. All
employee benefit plans and other agreements and arrangements of the Company will
be continued by the Surviving Company upon the same terms and subject to the
same conditions as currently in effect.
In accordance with generally accepted accounting principles, the
Company expects that the Reincorporation Merger will be accounted for as a
reorganization of entities under common control at historical cost in a manner
similar to a pooling of interests. Under this method, the assets and liabilities
of the combining entities will be carried forward at their recorded historical
book values.
It is anticipated that, if approved by the shareholders, the
Reincorporation Merger will become effective as soon as practicable after the
Annual Meeting. However, the Merger Agreement provides that the Reincorporation
Merger may be abandoned by the Board of Directors of either the Company or Newco
prior to the Effective Time, either before or after shareholder approval. In
addition, the Merger Agreement may be amended prior to the Effective Time,
either before or after shareholder approval in any fashion permitted by
applicable law.
-27-
Comparison of Certain Charter Document Provisions
The New Articles and New Bylaws differ in certain material respects
from the Company Certificate and Company Bylaws. Significant provisions of the
New Articles and New Bylaws, and certain important similarities and differences
between them and the Company Certificate and the Company Bylaws, are discussed
below.
Capital Stock. The Company Certificate provides that the total
authorized capital stock of the Company is 50,000,000 shares of common stock
having a par value of $0.10 per share and 10,000,000 shares of preferred stock
having a par value of $0.10 per share. The New Articles provide that the total
authorized capital stock of Newco is 50,000,000 shares of common stock without
par value and 10,000,000 shares of preferred stock without par value.
Preemptive Rights. Under the New Jersey BCA, shareholders of a
corporation organized prior to January 1, 1969 have preemptive rights unless a
bylaw adopted by the shareholders prior to that date or the certificate of
incorporation provides otherwise. Under the Pennsylvania BCL, shareholders do
not have preemptive rights to purchase shares unless the articles of
incorporation provide otherwise. The Company Certificate provides that the
shareholders of the Company do not have preemptive rights. As the New Articles
similarly provide that the shareholders do not have preemptive rights, the
shareholders will continue to have no preemptive rights following the
Reincorporation Merger.
Anti-Greenmail Provision. The Company Certificate provides that any
purchase by the Company of shares of Company Common Stock from any person (or
group of shareholders acting in concert) known by the Company to be a holder of
10% or more of the Company Common Stock entitled to vote in the election of
directors who has held such securities for less than two years at a per share
price in excess of the fair market value at the time of such purchase, be
approved by the holders of two-thirds of the shares of Company Common Stock
entitled to vote in the election of directors. Shareholder approval of such
purchases would not be required in the case of (i) an offer made available, on
the same terms, to all holders of all outstanding shares of Company Common Stock
entitled to vote in the election of directors or (ii) purchases effected on the
open market and not the result of a privately-negotiated transaction approved by
a majority of directors then in office. This provision is intended to eliminate
the payment of "greenmail" by discouraging purchasers from accumulating
beneficial ownership of a significant block of the shares of Company Common
Stock which is then offered for resale to the Company at a premium over market
price. Such resale offers are often made under threat of making a tender offer,
instituting a proxy fight or otherwise threatening the Company with disruption,
all of which significantly distract management's attention from its proper
functions. Because the premium paid in the repurchase of shares is often a
substantial one, it is paid at the expense of the remaining shareholders who are
not afforded the same opportunity to sell their shares at the premium price. The
unfairness of this tactic is often accentuated by the fact that the seller has
not been a shareholder of long standing but has merely accumulated the shares in
recent purchases with no intent to remain an investor in the company. The New
Articles do not have an anti-greenmail provision and, therefore, following the
Reincorporation Merger, it will be easier for a shareholder with a significant
block of the shares of Surviving Company Common Stock to command a premium over
market price in connection with the resale of such shares to the Surviving
Company.
Fair-Price Provision. The Company Certificate requires, with certain
limited exceptions, the approval of the holders of at least two-thirds of the
shares of Company Common Stock entitled to vote in the election of directors,
-28-
including shares held by an acquiror of 10% or more of the Company Common Stock,
as a condition to mergers and certain other business combinations involving the
Company and the acquiror of 10% or more of the Company Common Stock. The
provision is intended to help ensure fair treatment for all shareholders and to
encourage prospective acquirers to negotiate with the Board before attempting to
gain control of the Company, thus enabling the Board of Directors (which may be
in a better position than an individual shareholder to evaluate the fairness of
an offer) to study alternatives and to protect the interests of the
shareholders. The New Articles do not have a fair-price provision and, as
discussed below, Newco has opted out of the anti-takeover provisions included in
the Pennsylvania BCL. Therefore, following the Reincorporation Merger,
shareholder approval will not be required in connection with an existing
shareholder seeking to increase such shareholder's interest in the Surviving
Company.
Board of Directors; Committees.
Classified Board. Both the New Jersey BCA and the Pennsylvania BCL
permit, but do not require, the adoption of a "classified" board of directors
with staggered terms under which a part of the board of directors is elected
each year. Under the New Jersey BCA, the authorization for such a classified
board of directors must be included in the corporation's certificate of
incorporation or an amendment thereto. Additionally, under the New Jersey BCA,
the minimum and maximum terms for each class of directors are one and five
years, respectively, and the term of office of at least one class must expire in
each year. The Pennsylvania BCL similarly requires the authorization of a
classified board of directors to be included in the articles of incorporation
and, if not otherwise provided in the articles, provides that each class shall
be as nearly equal in number as possible, the maximum term for each class of
directors shall be four years and the term of office of at least one class shall
expire each year. The classified board provision in the Company Certificate has
the effect of making it more difficult for a third party to acquire control of
the Company, even if the takeover would benefit the Company, because only one of
the three classes is elected each year. Thus, it would currently take two
successive annual meetings to change a majority of the Board. The Company
Certificate classifies the Company Board into three separate classes, as nearly
equal in number as possible, with one class being elected each year. The New
Articles do not provide for a classified Board of Directors and, therefore, if
the Reincorporation Merger is approved and consummated, the Board will cease to
be staggered and all directors will stand for re-election annually. Following
the Reincorporation Merger, the absence of a classified board provision in the
New Articles will make it easier for a third party to acquire control of the
Surviving Company by eliminating the longer period required to elect a majority
of the Board of Directors. Such result may not always be in the best interest of
the Surviving Company or the shareholders.
Removal of Directors and Filling of Vacancies. The Company Certificate,
as permitted by the New Jersey BCA, provides that any director or the entire
Board of Directors may be removed (i) with or without cause only with the
approval of the holders of record of at least two-thirds of the voting power of
all of the outstanding shares of capital stock of the Company entitled to vote
in the election of the directors, voting together as a single class, or (ii)
with cause by the affirmative vote of a majority of the directors of the Company
then in office. The New Jersey BCA does not permit a board of directors to
remove directors without cause. The Company Certificate also provides that any
vacancy on the Board of Directors for any reason, shall, if occurring prior to
the expiration of the term of office of the class in which such vacancy occurs,
shall be filled only by majority vote the remaining directors then in office,
even if such directors constitute less than a quorum, or the sole remaining
director. As permitted by the Pennsylvania BCL, the New Bylaws provide that
vacancies in the board of directors shall be filled by a majority vote of the
remaining members of the board, even though less than a quorum, or by the sole
-29-
remaining director. Thus, the rights of the remaining directors then in office,
even if such directors constitute less than a quorum, to fill by majority vote
any vacancy on the Board will continue following the Reincorporation Merger. As
permitted by the Pennsylvania BCL, the New Bylaws provided that an individual
director or the entire board of directors may be removed with or without cause
by the majority vote of the shareholders entitled to elect such directors. Under
the Pennsylvania BCL, unless otherwise provided in the bylaws, the board of
directors may declare vacant the office of a director who has been judicially
declared of unsound mind or who has been convicted of an offense punishable by
imprisonment for a term of more than one year or if within 60 days after his
selection, he does not accept the office either in writing or by attending a
meeting of the board of directors. The New Bylaws do not otherwise provide for
removal of directors by the board. Thus, following the Reincorporation Merger it
will be more difficult for the Surviving Company Board to remove a director.
However, as the New Bylaws do not require more than majority approval for the
shareholders to remove directors, it will be less difficult for shareholders to
remove directors of the Surviving Company following the Reincorporation Merger
than it is for shareholders to presently remove directors of the Company.
Number of Directors. Both the Company Certificate and the New Bylaws
provide that the number of directors shall be determined only by the affirmative
vote of the majority of the Board of Directors. The Company Certificate provides
that the number of directors shall be not less than three nor more than seven.
The New Bylaws provide that the number of directors shall be not less than three
nor more than twelve. Consequently, while the permitted board size will be
different following the Reincorporation Merger, the Reincorporation Merger will
not change the process for approving changes in the size of the Board of
Directors.
Quorum. Under the Company Bylaws, a majority of the entire Board
constitutes a quorum for the transaction of business by the Board of Directors,
and an act by a majority of the quorum of directors constitutes an act of the
Board of Directors. The New Bylaws contain an equivalent provision. Accordingly,
the Reincorporation Merger will not change the method for determining the
existence of a quorum of the Board of Directors.
Interested Directors and Officers. The Pennsylvania BCL provides that a
contract or transaction between a corporation and one or more of its directors
or officers or an entity in which one or more of its directors or officers are
directors or officers or have a financial or other interest may not be voided
if: (1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors and
the board authorizes the contract or transaction by a majority vote of the
disinterested directors, even if the number of disinterested directors is less
than a quorum; (2) the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or known to the shareholders and a
majority of the shareholders approve of the transaction or contract; or (3) the
contract or transaction is fair to the corporation. A similar provision exists
under the New Jersey BCA. Consequently, the current criteria for determining
whether an interested director or officer may, directly or indirectly, enter
into a transaction or contract with the Company will not change following the
Reincorporation Merger.
Special Meetings of Board. Under the Company Bylaws, special meetings
of the Board of Directors may be called by the Chairman of the Board of
Directors or the President, or by any two directors. The New Bylaws provide that
special meetings of the board may be called by the Chairman of the Board, the
Vice Chairman of the Board, the President or the Chief Executive Officer, or
upon the written request of two directors delivered to the Secretary. Thus,
following the Reincorporation Merger more officers will have the ability to call
a special meeting of the Board of Directors.
-30-
Cumulative Voting. Under the Pennsylvania BCL, shareholders
automatically have cumulative voting rights in the election of directors unless
the articles of incorporation provide otherwise, whereas under the New Jersey
BCA cumulative voting is permitted only if expressly authorized in the
certificate of incorporation. Cumulative voting allows, under certain
circumstances, minority shareholders of a corporation to obtain representation
on the board of directors of a corporation. While the Company Certificate grants
cumulative voting rights in the election of directors, the New Articles
specifically provide that cumulative voting shall not be used in the election of
directors. The removal of cumulative voting in the election of directors
represents a significant change in the rights of the shareholders because,
following the Reincorporation Merger, the holders of a majority of Surviving
Company Common Stock will have the ability to elect the entire Surviving Company
Board.
In the event that the Investment Transaction and the Reincorporation
are approved and consummated, Tarte and Harrow will collectively own 31.0% of
the outstanding shares of Surviving Company Common Stock, Ginsburg will 8.4% of
the outstanding shares of Surviving Company Common Stock, and Goldberg will own
3.1% of the outstanding shares of Surviving Company Common Stock, including
other shares of Surviving Company Common Stock held by Harrow, Ginsburg and
Goldberg. Additionally, if the Investors exercise all of their Warrants for the
purchase of up to an additional 5,300,000 shares of Surviving Company Common
Stock and Harrow exercises the options to purchase shares of Company Common
Stock that he currently holds, they will collectively own approximately 59.3% of
the outstanding shares of Surviving Company Common Stock, with Tarte and Harrow
collectively owning approximately 44.0% of the issued and outstanding shares of
Surviving Company Common Stock, Ginsburg owning approximately 11.4% of the
issued and outstanding shares of Surviving Company Common Stock, and Goldberg
owning approximately 3.9% of the issued and outstanding shares of Surviving
Company Common Stock. Furthermore, following the issuance by the Surviving
Company of new stock options to Ginsburg and Goldberg at least six months
following the cancellation of their existing Option Agreements (as more
particularly described under the heading "Participation by Current Officers in
Investment Transaction" in this Investment Transaction Proposal), if the
Investors exercise all of their options and Warrants to purchase shares of
Surviving Company Common Stock, they will collectively own approximately 61.8%
of the outstanding shares of Surviving Company Common Stock, with Tarte and
Harrow collectively owning approximately 41.3% of the issued and outstanding
shares of Surviving Company Common Stock, Ginsburg owning approximately 13.9% of
the issued and outstanding shares of Surviving Company Common Stock, and
Goldberg owning approximately 6.6% of the issued and outstanding shares of
Surviving Company Common Stock.
Fiduciary Duties of Directors. Both New Jersey and Pennsylvania law
provide that the board of directors has the ultimate responsibility for managing
the business and affairs of a corporation. In discharging this function,
directors of Pennsylvania and New Jersey corporations owe fiduciary duties of
care and loyalty to the corporations for which they serve as directors.
Directors of New Jersey corporations also owe fiduciary duties of care and
loyalty to their shareholders.
A director of a Pennsylvania business corporation stands in a fiduciary
relationship to the corporation and must perform his duties as a director, in
good faith, in a manner he reasonably believes to be in the best interests of
the corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances.
In contrast to the New Jersey BCA under which directors owe a fiduciary
duty of care and loyalty to both the corporation and its shareholders, the
Pennsylvania BCL specifically provides that a director's fiduciary duty of care
-31-
and loyalty is solely to the business corporation and may be enforced by the
corporation or by a shareholder only in a derivative suit, not by a shareholder
directly.
In performing his duties, a director of a Pennsylvania business
corporation is entitled to rely, in good faith, on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by any of the following: (i) one or more
officers or employees whom the director reasonably believes to be reliable and
competent in the matters presented; (ii) counsel, public accountants or other
persons as to matters which the director reasonably believes to be within the
professional competence of such persons; and (iii) a committee of the board upon
which he does not serve, duly designated in accordance with law, as to matters
within its designated authority, which committee the director reasonably
believes to merit confidence. A director will not be considered to be acting in
good faith if he has knowledge concerning the matter in question which would
cause his reliance to be unwarranted. Under the Pennsylvania BCL, absent a
breach of fiduciary duty, lack of good faith or self-dealing, actions taken by a
director are presumed to be in the corporation's best interests.
A director of a New Jersey corporation, in the performance of his
duties, is fully protected in relying, in good faith, upon (i) the opinion of
counsel for the corporation; (ii) written reports setting forth financial data
concerning the corporation and prepared by an independent public accountant or
certified public accountant; (iii) financial statements, books or of account or
report of the corporation or (iv) written reports of committees of the board.
Accordingly, the sources upon which a director can justifiably rely in the
performance of his fiduciary duties will not be significantly affected by the
Reincorporation Merger.
Under the Pennsylvania BCL, a registered Pennsylvania corporation may
elect a fiduciary duty standard for its directors that provides that in
discharging the duties of their respective positions, the board of directors,
committees of the board and individual directors of a business corporation may,
in considering the best interests of the corporation, consider the effects of
any action upon employees, suppliers and customers of the corporation and upon
the communities in which offices or other establishments of the corporation are
located, and all other pertinent factors. The New Articles adopt this fiduciary
duty standard. The New Jersey BCA contains a similar provision permitting the
board of directors, committees of the board and individual directors, when
discharging the duties of their respective positions, to consider the interests
of constituencies other than the corporation or its shareholders.
Director Liability and Indemnification of Officers and Directors. Both
the New Jersey BCA and the Pennsylvania BCL contain provisions and limitations
regarding directors' liability and regarding indemnification by a corporation of
its officers, directors and employees.
The New Jersey BCA permits a New Jersey corporation to include a
provision in its certificate of incorporation which eliminates or limits the
personal liability of a director or officer to the corporation or its
shareholders for monetary damages for breach of fiduciary duties as a director
or officer. As permitted by the New Jersey BCA, the Company Certificate limits
the liability of directors and officers by providing that directors and officers
of the Company are not personally liable to the corporation or its shareholders
for damages for the breach of any duty owed to the corporation or its
shareholders, except that directors and officers are not relieved from liability
for any breach of duty based upon an act or omission (i) in breach of the
director's or officer's duty of loyalty to the corporation or its shareholders,
(ii) not in good faith or involving a knowing violation of law, or (iii)
-32-
resulting in receipt by such person of an improper personal benefit. Under the
New Jersey BCA, corporations are also permitted to indemnify directors in
certain circumstances and required to indemnify directors under certain
circumstances. Under the New Jersey BCA, a director, officer, employee or agent
may, in general, be indemnified by the corporation if he has acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In
addition, under the New Jersey BCA, corporations must indemnify a director to
the extent the director has been successful on the merits or otherwise. The
Company Certificate does not have any effect on the availability of equitable
remedies (such as an injunction or rescissions) for breach of fiduciary duty.
However, as a practical matter, equitable remedies may not be available in
particular circumstances.
The Pennsylvania BCL contains a similar provision relating to the
indemnification of directors and officers. Additionally, the New Bylaws provide
that directors shall not be personally liable for monetary damages for any
action taken, or any failure to take any action, unless (i) such director has
breached or failed to perform the duties of his office under the Pennsylvania
BCL and (ii) the breach or failure constitutes self-dealing, willful misconduct
or recklessness, or unless such liability is imposed pursuant to a criminal
statute or for the payment of taxes. Accordingly, the liability protection to
directors and officers for actions arising from their breach of fiduciary duties
will not be significantly affected by the Reincorporation Merger.
Amendments to Bylaws. The New Jersey BCA provides that a Board of
Directors has the power to make, alter and repeal a corporation's bylaws, unless
such power is reserved to the corporation's shareholders in the corporation's
certificate of incorporation, but the bylaws made by the board may be altered or
repealed, and new bylaws made, by the shareholders. The Company Certificate does
not reserve such power to make, alter and repeal the Company's bylaws to the
shareholders. Under the Pennsylvania BCL, the shareholders of a Pennsylvania
corporation have the power (with certain exceptions) to adopt, amend or repeal a
corporation's bylaws, however, such authority to adopt, amend or repeal the
bylaws may be expressly vested by the bylaws in the board of directors, subject
to the power of the shareholders to change such action. The New Bylaws grant the
Board of Directors the power to amend the New Bylaws. Accordingly, the ability
of the shareholders to amend the New Bylaws following the Reincorporation Merger
will be very similar to the current rights of the Company's shareholders.
Dividends. The New Jersey BCA prohibits a corporation from making a
distribution to its shareholders if, after giving effect to such distribution,
(a) the corporation would be unable to pay its debts as they become due in the
usual course of business or (b) the corporation's total assets would be less
than its total liabilities. The Pennsylvania BCL contains a similar provision.
Accordingly, the Reincorporation Merger will not change the rights of
shareholders in this regard.
Comparison of Shareholders' Rights under New Jersey BCA and
Pennsylvania BCL
Although it is impracticable to compare all of the aspects in which the
New Jersey BCA and the Pennsylvania BCL differ with respect to shareholders'
rights, the following is a summary of certain significant differences. See also
"Comparison of Certain Charter Document Provisions," above.
-33-
Amendment of Articles/Certificate of Incorporation.
To amend certain terms of a corporation's certificate of incorporation,
the New Jersey BCA allows an amendment to be made by board action alone (for
example, an amendment to effect a share dividend). With respect to corporations
such as the Company organized prior to January 1, 1969, other general amendments
under the New Jersey BCA require the action of the board and the affirmative
vote of two-thirds of votes cast by the holders of shares entitled to vote
thereon, unless the corporation's certificate of incorporation requires a
greater percentage. The Company Certificate requires a greater percentage to
amend or repeal certain critical provisions of the Company Certificate. Except
for certain amendments to the articles of incorporation that do not require
shareholder approval, the Pennsylvania BCL requires the approval of the majority
of the votes cast by all shareholders entitled to vote thereon (and, if
applicable, a majority of the outstanding stock of each class entitled to vote
thereon) in order to amend the corporation's articles of incorporation, unless a
greater number is specified in the articles of incorporation. The New Articles
does not specify such greater number of holders of securities having power to
vote. However, under the Pennsylvania BCL, unless provided otherwise in a
corporation's articles of incorporation or bylaws, the shareholders of a
registered corporation are not permitted to propose an amendment to the articles
of incorporation and every amendment to the articles of incorporation must be
proposed by a resolution of the board of directors. The New Articles and New
Bylaws do not allow the shareholders to propose an amendment to the New
Articles. Consequently, following the Reincorporation Merger, the shareholders
will be able to more easily approve an amendment to the New Articles, but they
will not be able to propose any such amendments.
Certain provisions that were previously contained in the Company
Certificate are now found in the New Bylaws. As indicated above, material
changes to the Company Certificate require at least the affirmative vote of
two-thirds of votes cast by the holders of shares entitled to vote thereon,
whereas the New Bylaws provide that they may be amended by either a majority
vote the shareholders or a majority vote of the members of the Newco Board.
Consequently, these provisions will be able to be changed more easily following
the Reincorporation Merger.
Right to Call a Special Meeting of Shareholders.
The New Jersey BCA provides that a special meeting of shareholders may
be called by the President or the board of directors, or by such other
directors, officers or shareholders as may be provided in the bylaws.
Additionally, upon application of the holder or holders of not less than 10% of
all the shares entitled to vote at a meeting, the Superior Court of New Jersey,
for good cause shown, may order that a special meeting be called. The Company
Bylaws provide that special meetings of the shareholders may be called by the
affirmative vote of a majority of the entire board or by the President, or upon
the written request of the shareholders representing at least 30% of the capital
stock of the Company delivered to the board. Under the Pennsylvania BCL, unless
provided otherwise in a corporation's articles of incorporation or bylaws, the
shareholders of a registered corporation are not permitted to call a special
meeting of the shareholders. The New Bylaws provide that special meetings of
shareholders may be called by the Chairman of the Board, the Vice Chairman of
the Board, the President, the Chief Executive Officer, the board of directors or
shareholders entitled to cast at least 30% of the votes that all shareholders
are entitled to cast at the special meeting. Consequently, following the
Reincorporation Merger, more officers will have the ability to call a special
meeting of the shareholders and it will easier for the shareholders to call a
special meeting of the shareholders under the bylaws, but shareholders with at
least 10% of all the shares entitled to vote at a meeting will no longer have a
-34-
statutory right to request a special meeting of shareholders upon the showing of
good cause.
Anti-Takeover Provisions.
The New Jersey Takeover Bid Disclosure Law. The New Jersey Takeover Bid
Disclosure Law provides, among other things, that any person making an offer to
purchase in excess of 10% (or such amount which, when aggregated with such
person's present holdings, exceeds 10% of any class of equity securities) of any
corporation or other issuer of securities which is either organized under the
laws of New Jersey or has its principal place of business or a substantial
portion of its total assets in New Jersey must, twenty (20) days before the
offer is made, file a disclosure statement with the target company and with the
Bureau of Securities of the Division of Consumer Affairs of the New Jersey
Department of Law and Public Safety (the "Bureau").
Such a takeover bid may not proceed until after the receipt by the
filing party of the Bureau's permission. Such permission may not be denied
unless the Bureau, after a public hearing, finds that (i) the financial
condition of the offeror is such as to jeopardize the financial stability of the
target company or prejudice the interests of any employees or security holders
who are unaffiliated with the offeror, (ii) the terms of the offer are unfair or
inequitable to the security holders of the target company, (iii) the plans and
proposals which the offeror has to make any material change in the target
company's, business, corporate structure, or management are not in the interest
of the target company's remaining security holders or employees, (iv) the
competence, experience and integrity of those persons who would control the
operation of the target company are such that it would not be in the interest of
the target company's remaining security holders or employees to permit the
takeover, or (v) the terms of the takeover bid do not comply with the provisions
of New Jersey Takeover Bid Disclosure Law.
Shareholders Protection Act. Chapter 10A was added to the New Jersey
BCA in 1986 to protect shareholders and other corporate "constituents." It
generally provides that no resident domestic corporation shall engage in any
business combination with any interested stockholder for a period of 5 years
following that interested stockholder's stock acquisition date unless the
business combination is approved by the Board of Directors prior to that stock
acquisition date. A "resident domestic corporation" is an issuer of voting stock
which is organized under the laws of New Jersey and, as of the stock acquisition
date in question, has its principal executive offices located in New Jersey or
significant business operations located in New Jersey. An "interested
stockholder" is any person (other than the resident domestic corporation or its
subsidiary) that (i) is the beneficial owner directly or indirectly, of 10% or
more of the voting power of the outstanding voting stock of the resident
domestic corporation, or (ii) is an affiliate or associate of that resident
domestic corporation who, at any time within the five year period immediately
prior to the date in question, was a beneficial owner of 10% of the then
outstanding voting stock of the resident domestic corporation. A "beneficial
owner" of stock is a person that, individually or with or through any of its
affiliates or associates (i) beneficially owns that stock directly or
indirectly, (ii) has the right to acquire or vote that stock, or (iii) has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
-35-
voting or disposing of that stock with any other beneficial owner thereof. An
"affiliate" of a beneficial owner is a person that directly or indirectly
through one or more intermediaries controls, or is controlled by or under common
control with, the beneficial owner.
Accordingly, the New Jersey BCA gives an New Jersey Corporation's board
of directors veto power over any business combination proposed by one who
directly or indirectly acquires 10% or more of the corporation's voting stock.
The "business combinations" at which these provisions are directed include any
merger or consolidation of a resident domestic corporation or its subsidiary
with an interested stockholder.
Unless it falls under certain excluded categories of transactions, a
business combination is prohibited unless any one of the following three
conditions are satisfied:
(1) the board of directors must approve the business combination prior
to the stock acquisition date of the interested stockholder;
(2) the holders of two-thirds of the voting stock of the resident
domestic corporation not beneficially owned by the interested stockholder must
approve the business combination by affirmative vote at a meeting called for
that purpose; or
(3) (a) the shareholders of the resident domestic corporation must
receive the higher of (i) the maximum price paid by the interested stockholder
during the five years preceding the announcement date or the date the interested
stockholder became such, whichever is higher, plus, in either case, interest
minus dividends or (ii) the market value of the resident domestic corporation's
common stock on the announcement date or the interested stockholder's stock
acquisition date, whichever is higher, plus, in either case, interest minus
dividends.
(b) the holder of stock other than common stock receives a
similarly determined price, taking into account the highest preferential amount
per share to which the holders of such shares are entitled in the event of any
liquidation, dissolution or winding up of the resident domestic corporation,
plus any preferential dividends to which they would be entitled that is not
included in the preferential amount,
(c) the consideration to the shareholders is paid in cash or in the
same form that the interested stockholder used to acquire the largest block of
stock that he acquired,
(d) the holders of all outstanding stock not owned by the
interested stockholder received the consideration required by the preceding
paragraphs in the business combination, and
(e) the interested stockholder did not become the beneficial owner
of any additional shares of stock of the resident domestic corporation between
his stock acquisition date and the date of consummation of the business
combination, except (i) as part of the transaction that resulted in his becoming
an interested stockholder, (ii) by virtue of proportionate stock splits,
dividends or distributions not themselves constituting a business combination,
to a business combination meeting the conditions of paragraph (c) or (iv),
through purchase at a price that would have satisfied the requirements of
paragraphs (a), (b) and (c).
The Company does not believe it is subject to the New Jersey
Shareholders Protection Act described above because it does not meet the
definition of a "resident corporation," as its principal executive offices are
-36-
located in Pennsylvania and it does not have significant business operations in
New Jersey.
Pennsylvania corporations that have a class of stock registered under
the Exchange Act, such as the Surviving Company after the Reincorporation
Merger, are automatically subject to certain anti-takeover provisions of the
Pennsylvania BCL, unless the articles of incorporation provide that those
provisions shall not apply to the corporation. TO THE FULLEST EXTENT POSSIBLE,
NEWCO HAS OPTED OUT OF THE SPECIFIC ANTI-TAKEOVER PROVISIONS INCLUDED IN THE
PENNSYLVANIA BCL. Newco has opted out of those anti-takeover provisions by
having the New Articles expressly state that they shall not apply to the
corporation.
The Pennsylvania BCL's anti-takeover provisions that do not apply to
Newco are:
Section 1715 which expressly states that the fiduciary duty of
directors does not require them to redeem any rights under, or
modify or render inapplicable any shareholder rights plan or
certain of the anti-takeover provisions of the Pennsylvania
BCL;
Section 2538 which requires that fundamental corporate
transactions, such as mergers and share exchanges, be approved
by a majority vote of the disinterested shareholders;
Subchapter 25E which, with certain exceptions, entitles the
shareholders to be paid the fair value of their shares by
anyone who acquires 20% or more of the outstanding voting
power of the corporation;
Subchapter 25F which imposes certain financial requirements
and restrictions on business combinations with interested
shareholders;
Subchapter 25G which, with certain exceptions, limits the
voting rights of persons who have acquired 20% or more of the
outstanding voting power of the corporation; and
Subchapter 25H which requires disgorgement of certain profits
made by "controlling shareholders" following their attempts to
gain control of the corporation.
As a result of Newco's opting out of the specific anti-takeover
provisions included in the Pennsylvania BCL, following the approval and
consummation of the Investment Transaction and the Reincorporation, the
Investors will have more flexibility to purchase from or sell to the Surviving
Company shares of the Surviving Company Common Stock, to engage in other
interested party transactions, or otherwise to acquire the Surviving Company.
Management of the Company is not aware of any attempt to acquire the
Company by a third party and does not have any plans to propose any other
changes to the charter documents or corporate structure of the Company which
would have an anti-takeover purpose or effect.
Mergers, Acquisitions and Other Transactions.
In addition to the anti-takeover provisions discussed above, with
respect to corporations such as the Company organized prior to January 1, 1969,
the New Jersey BCA provides that the sale of substantially all of a
-37-
corporation's assets, mergers, consolidations, and any acquisitions which
involve the issuance of additional voting shares, such that the number of
additional voting shares issued exceeds 40% of the voting shares outstanding
prior to the transaction, must be approved by a affirmative vote of two-thirds
of votes cast by the holders of shares entitled to vote thereon, unless the
corporation's certificate of incorporation requires a greater percentage. As
permitted by the New Jersey BCA, the Company Certificate requires a greater
percentage for certain business combinations. Such business combinations require
the affirmative vote of holders of two-thirds of the shares of Company Common
Stock entitled to vote in the election of directors.
Under the Pennsylvania BCL, mergers and consolidations require the
approval of a majority of the shares entitled to vote thereon, and if any class
or series of shares is entitled to vote thereon as a class, the affirmative vote
of a majority of the votes cast in each class vote. A proposed plan of merger or
consolidation will not be deemed to have been adopted by the corporation unless
it has also been approved by the board of directors. Accordingly, it will be
easier for shareholders to approve a merger or consolidation following the
Reincorporation Merger.
Dissolution.
Under the New Jersey BCA a corporation may be voluntarily dissolved by
(i) the written consent of all its shareholders or (ii) the adoption by the
corporation's board of directors of a resolution recommending that the
corporation be dissolved and submission of the resolution to a meeting of
shareholders, at which meeting the resolution is adopted. The New Jersey BCA
requires that to effect a dissolution by consent of shareholders, all
shareholders entitled to vote thereon must sign and file a certificate of
dissolution. If dissolution is pursuant to the action of the Board and
shareholders, the affirmative vote of the majority of votes cast (assuming that
the number of votes cast constitutes a quorum) by the shareholders entitled to
vote thereon. In order to effectuate a dissolution of a Pennsylvania
corporation, the Pennsylvania BCL requires the adoption by the corporation's
board of directors of a resolution recommending that the corporation be
dissolved and submission of the resolution to a meeting of shareholders, at
which meeting the resolution is adopted. Consequently, the ability of
shareholders to effectuate a dissolution of the corporation following the
Reincorporation Merger will only change to the extent that shareholders will no
longer have the ability to dissolve the corporation solely upon their unanimous
written consent.
Availability of Appraisal Rights.
Under the New Jersey BCA, dissenting shareholders who comply with
certain procedures are entitled to appraisal rights in connection with the
merger, consolidation or sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation not in the usual or regular
course of business, unless the certificate of incorporation otherwise provides.
However, appraisal rights are not provided when (i) the shares to vote on such
transaction are listed on a national securities exchange or held of record by
not less than 1,000 holders (or shareholders receive in such transaction cash
and/or securities which are listed on a national securities exchange or held of
record by not less than 1,000 shareholders) or (ii) no vote of the corporation's
shareholders is required for the proposed transaction.
Under the Pennsylvania BCL, dissenting shareholders who follow
prescribed statutory procedures are entitled to appraisal rights in connection
with certain mergers or consolidations, unless otherwise provided in the
corporation's articles of incorporation. Such appraisal rights are not provided
to holders of shares that are listed on a national securities exchange or held
-38-
of record by more than 2,000 shareholders. Accordingly, the Surviving Company's
shareholders will not qualify for appraisal rights following the Reincorporation
Merger
No Appraisal Rights Due to Reincorporation Merger.
Under the New Jersey BCA, the Company's shareholders do not qualify for
appraisal rights in connection with the Reincorporation Merger because the
shares voting on the Reincorporation Merger are listed on the American Stock
Exchange, a national securities exchange.
Federal Income Tax Consequences of the Reincorporation Merger
The Company will not request a ruling from the United States Internal
Revenue Service regarding the federal income tax consequences of the
Reincorporation Merger. However, the Company believes the Reincorporation Merger
will constitute a reorganization under Section 368 of the Code. Consequently,
holders of Company Common Stock will not recognize any gain or loss for federal
income tax purposes as a result of the conversion of their Company Common Stock
into shares of Surviving Company Common Stock. For federal income tax purposes,
a holder's aggregate basis in the shares of Surviving Company Common Stock
received in the Reincorporation Merger will equal such holder's aggregate basis
in Company Common Stock converted therefor and such holder's holding period for
Surviving Company Common Stock received in the Reincorporation Merger will
include his holding period in Company Common Stock converted therefor.
Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to the Surviving Company
pursuant to the Reincorporation Merger. In addition, the Surviving Company will
succeed to and take into account the earnings and profits, accounting methods,
and other tax attributes of the Company specified in Section 381(c) of the Code.
Holders of Company Common Stock should consult their own tax advisors
as to the application and effect of state, local and foreign income and other
tax laws to the conversion of their Company Common Stock into shares of
Surviving Company Common Stock pursuant to the Reincorporation Merger.
Required Vote
Approval of the Reincorporation Proposal requires the affirmative vote
of two-thirds of votes cast thereon at the Annual Meeting. A vote for the
Reincorporation Proposal will constitute specific shareholder approval for the
adoption of the Merger Agreement and all other transactions related to the
Reincorporation Proposal. All of the directors of the Company, who together
directly own 384,384 shares of Company Common Stock (representing 5.0%), have
informed the Company that they intend to cause all such shares to be voted for
the approval of the Reincorporation Proposal.
Recommendation of the Board of Directors
The Company's Board of Directors recommends a vote FOR Proposal No. 3.
-39-
PROPOSAL NO. 4
APPROVAL OF THE 2001 EQUITY INCENTIVE PLAN
On September 12, 2001, the Company Board considered and adopted,
subject to shareholder approval, the Marlton Technologies, Inc. 2001 Equity
Incentive Plan (the "Plan"). The purpose of the Plan is to promote and advance
the Company's interests and the interests of the Company's shareholders by
enabling the Company to attract, retain, and reward employees, outside advisors,
and directors of the Company and its subsidiaries. The Plan is intended to
strengthen the common economic interests of the Company's shareholders and its
employees, directors and other service providers, and to promote the Company's
long-term growth and profitability.
The Plan covers 2,500,000 shares of Company Common Stock. This number
of shares was selected based on the Company Board's estimation of the Company's
needs under the Plan for the foreseeable future. This number may be equitably
adjusted by the Company Board in the event of a recapitalization, stock split or
combination, stock dividend or other similar event or transaction affecting
Company Common Stock. In addition, shares subject to awards that expire or that
are forfeited, as well as shares surrendered to satisfy any tax withholding
obligation associated with an award will again be available for issuance under
the Equity Incentive Plan. Finally, previously acquired shares of Company Common
Stock that are surrendered in satisfaction of the exercise price of an option
issued under the Plan will be added to the number of shares available for grant
under the Plan.
A summary of certain terms and provisions of the Plan follows. This
summary is subject to the detailed terms and provisions of the Equity Incentive
Plan, a copy of which is attached hereto as Annex XIII.
Description of the Equity Incentive Plan
The Plan permits the grant of equity-based awards to employees,
directors, consultants and other individuals that provide services to the
Company and its affiliates. Awards that may be granted under the Plan include
incentive stock options, non-qualified options and shares of restricted stock.
The Company Board or a Committee of the Company Board composed of two
or more non-employee directors will administer the Plan and determine the
recipients of awards and the type, amount, and terms of awards issued under the
Plan. For example, the Company Board or its Committee will determine the
exercise price of an option, the form of payment of the exercise price, the
number of shares subject to the option, and the date or dates on which the
option becomes exercisable. In addition, the Company Board or its Committee is
authorized to: (i) adopt, alter or repeal any administrative rules regarding the
operation of the Plan, (ii) interpret the Plan or any award agreement issued
under the Plan, (iii) amend any award agreement issued under the Plan with the
participant's consent, (iv) correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any award agreement issued under the Plan,
and (v) to otherwise supervise the administration of the Plan.
While no awards have been or will be granted under the Plan prior to
the date of the Annual Meeting, the Company, Ginsburg and Goldberg have entered
into an agreement, pursuant to which the Option Agreements will be canceled
(which, as more particularly described under the heading "Participation by
Current Officers in Investment Transaction" in the Investment Transaction
Proposal, is expected to occur immediately prior to the consummation of the
Investment Transaction) and Ginsburg and Goldberg will be issued new options to
-40-
purchase Surviving Company Common Stock under the Plan. Because all other future
awards under the Plan will be granted in the discretion of the Company Board or
its Committee, the type, number, recipients, and other terms of such awards
cannot be determined at this time. Information regarding the Company's recent
practices with respect to annual, long-term, and stock-based compensation under
other plans is presented in the "Summary Compensation Table" above, and in
footnotes to the Company financial statements for the year ended December 31,
2000, in the Annual Report which accompanies this Proxy Statement.
If approved, the Plan will continue in effect until awards have been
granted covering all available shares under the Plan or the Plan is otherwise
terminated by the Company Board, provided that no incentive stock options will
be granted more than ten years after the date the Plan is approved by
shareholders. Termination of the Plan will not affect outstanding awards.
The Plan permits the Company Board to amend the Plan at any time.
However, in order to retain favorable treatment of awards under tax laws, the
Company Board cannot increase the number of shares covered by the Plan or change
the eligible class of award recipients without further shareholder approval.
The Plan provides that, upon a "Change in Control," the Company Board
or its Committee may, in its discretion, take one or more of the following
actions: (i) cause all outstanding stock options to vest, (ii) cause all
outstanding shares of restricted stock to become non-forfeitable, (iii) replace
any outstanding option with an option to purchase common stock of any successor
company, (iv) exchange any outstanding shares of restricted stock for restricted
shares in any successor company, (v) redeem any outstanding share of restricted
stock for cash equal to the fair market value of an unrestricted share of
Company Common Stock on the date of the Change in Control, or (vi) cancel any
outstanding option in exchange for a cash payment equal to the difference
between the exercise price of that option and the fair market value of the
shares of Company Common Stock subject to that option on the date of the Change
in Control. For this purpose, "Change in Control" means: (x) the sale, transfer,
assignment or other disposition by stockholders of the Company, in one
transaction or a series of related transactions, of more than fifty percent
(50%) of the voting power represented by the then outstanding capital stock of
the Company, (y) the sale of substantially all the assets of the Company, or (z)
the liquidation or dissolution of the Company.
The following is a brief summary of the various types of awards that
may be granted under the Plan.
Stock Options. Options granted under the Plan may be either incentive
stock options, a tax-favored form of award meeting the requirements of Section
422 of the Internal Revenue Code, or nonqualified options, which are not
entitled to special tax treatment. Incentive stock options may be granted only
to employees and must have an exercise price of at least the fair market value
of Company Common Stock on the date of grant.
Options granted under the Plan may not have a term of more than ten
years. Except as otherwise provided by the Company Board or its Committee with
respect to a particular option, options awarded under the Plan are not
transferable other than by will or the laws of intestate succession and, during
a participant's lifetime, may only be exercised by that participant.
-41-
In no event may options for more than 750,000 shares of Company Common
Stock be granted to any single individual under the Plan during any one calendar
year.
Restricted Stock Awards. Restricted stock are shares of Company Common
Stock that are subject to forfeiture if the recipient terminates employment or
service as an advisor during a specified period, or otherwise fails to fulfill
specified vesting conditions. Stock certificates representing shares of
restricted stock are generally issued but held in escrow during the period that
the shares remain subject to forfeiture. From the date of issuance of shares of
restricted stock, the recipient will be entitled to the rights of a shareholder
with respect to the shares.
Federal Income Tax Consequences
The following discussion summarizes the principal anticipated federal
income tax consequences of awards granted under the Plan to participants and to
the Company.
Incentive Stock Options. A recipient of an option does not realize
taxable income upon the grant or exercise of an incentive stock option. If no
disposition of shares occurs within two years from the date of grant or within
one year from the date of exercise, then (a) upon the sale of the shares, any
amount realized in excess of the exercise price is taxed to the option recipient
as long-term capital gain and any loss sustained will be a long-term capital
loss, and (b) no deduction is allowed to the Company for federal income tax
purposes. For purposes of computing alternative minimum taxable income, the
difference between the exercise price of a incentive stock option and the fair
market value of the subject shares at the time of exercise is an item of tax
preference (and is therefore included in alternative minimum taxable income).
A sale of shares acquired upon the exercise of an incentive stock
option within two years from the date of option grant or within one year from
the date of option exercise is known as a "disqualifying disposition." In the
case of a disqualifying disposition: (a) the recipient will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of the shares) over the exercise price thereof, and (b) the
Company will be entitled to deduct such amount. Any further gain realized is
taxed as a short-term or long-term capital gain, as applicable, and does not
result in any deduction for the Company. A disqualifying disposition will
generally avoid the alternative minimum tax consequences of the exercise of an
incentive stock option.
Nonqualified Options. No income is realized by an option recipient at
the time a nonqualified option is granted. Upon exercise, (a) ordinary income is
realized by the option recipient in an amount equal to the difference between
the exercise price and the fair market value of the shares on the date of
exercise, and (b) the Company receives a tax deduction for the same amount. Upon
disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term or long-term capital gain or loss, as
applicable, and will not result in any deduction to the Company.
Restricted Stock Awards. Generally, a participant will not recognize
any income upon issuance of restricted stock award that is subject to
forfeiture. Generally, a participant will recognize ordinary income upon the
vesting of restricted stock in an amount equal to the fair market value of the
shares at the time of vesting (less any amount paid for those shares). Dividends
paid with respect to awards during the period such awards are subject to
forfeiture will be taxable as ordinary income to the participant.
-42-
A participant may elect to recognize compensation income upon the grant
of shares of restricted stock, based on the fair market value of those shares at
the date of grant less any amount paid for those shares. This election is
permitted by Section 83(b) of the Internal Revenue Code and, therefore, is often
referred to as an "83(b) election." If a participant makes an 83(b) election,
the Company will be entitled to a deduction equal to the amount of ordinary
income recognized by the participant on the date of grant. In addition,
dividends paid with respect to the shares of restricted stock will not be
treated as ordinary income, but rather as dividend income, and the participant
will not recognize additional income when the shares vest. Once the 83(b)
election is made, any future change in the value of the shares will be short or
long term capital gain or loss, as applicable, and will not result in any
further deduction for the Company.
Limitation on Deductibility of Certain Compensation. Section 162(m) the
Internal Revenue Code generally makes nondeductible to the Company taxable
compensation paid to a single individual in excess of $1 million in any calendar
year if the individual is the Chief Executive Officer or one of the next four
highest-paid executive officers, unless the excess compensation is considered to
be "performance based." Among other requirements contained in Section 162(m),
the material terms of a compensation plan in which such officers participate
must be approved by shareholders for awards or compensation provided under the
plan to be considered "performance based." If this proposal to adopt the Plan is
approved, the Company believes that its deductions for amounts paid pursuant to
stock options granted under the Plan will not be limited by Section 162(m)
because such awards will qualify as performance-based compensation.
The foregoing provides only a general description of the application of
federal income tax laws to certain types of awards under the Plan. This
discussion is intended for the information of shareholders considering how to
vote at the Annual Meeting and not as tax guidance to participants in the Plan,
as the consequences may vary with the types of awards made and the individual
circumstances of the participant. Different tax rules may apply, including in
the case of variations in transactions that are permitted under the Plan (such
as payment of the exercise price of an option by surrender of previously
acquired shares). The summary does not address the effects of other federal
taxes (including possible "golden parachute" excise taxes) or taxes imposed
under state, local, or foreign tax laws.
Market Value of Company Common Stock
The market value of the Company Common Stock on September 21, 2001 was
$0.41 per share.
Required Vote
Approval of the 2001 Equity Incentive Plan requires the affirmative
vote of the holders of a majority of Company Common Stock present and entitled
to vote thereon at the Annual Meeting. All of the directors of the Company, who
together directly own 384,384 shares of Company Common Stock (representing
5.0%), have informed the Company that they intend to cause all such shares to be
voted for the approval of the 2001 Equity Incentive Plan.
Recommendation of the Board of Directors
The Company's Board of Directors recommends a vote FOR Proposal No. 4.
-43-
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has recommended and the Board of Directors has
selected the firm of PricewaterhouseCoopers LLP as the Company's independent
public accountants for 2001. A representative of PricewaterhouseCoopers is
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if he so desires and will be available to respond to appropriate
questions.
PricewaterhouseCoopers served as the Company's independent public
accountants in 2000. For the fiscal year ending December 31, 2000, the Company
was billed $130,000 by PricewaterhouseCoopers for professional services rendered
for the audit of the financial statements included in the Company's Annual
Report on Form 10-K and the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q. For the fiscal year ending December
31, 2000, the Company was also billed $160,000 by PricewaterhouseCoopers for
financial information systems design and implementation fees. For the fiscal
year ending December 31, 2000, the Company was not billed any amounts by
PricewaterhouseCoopers for any other services. The Audit Committee discussed
with PricewaterhouseCoopers and also considered whether the provision of
information technology services and other non-audit services by
PricewaterhouseCoopers to the Company is compatible with maintaining such firm's
independence.
SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion
in the Company's proxy materials for the 2002 Annual Meeting, such proposals
must be received by the Corporate Secretary of the Company not later than
January 19, 2002. Any shareholder proposal or director nominee submitted, other
than matters submitted for inclusion in the proxy statement in accordance with
the prior sentence, will be considered untimely if not received by the Company
in writing no earlier than February 20, 2002 and no later than March 20, 2002.
The Board knows of no other business to be transacted, but if any other
matters are properly presented at the Annual Meeting, the persons named in the
accompanying form of proxy will vote upon such matters in accordance with their
best judgment.
The cost of soliciting proxies will be borne by the Company.
Arrangements may be made with brokerage houses, custodians, nominees, and other
fiduciaries to send proxy material to their principals and the Company may
reimburse them for their expenses. In addition to solicitation by mail, officers
and employees of the Company, who will receive no compensation for their
services other than their regular salaries, may solicit proxies by telephone,
telegraph and personally. Additionally, the Company may retain the services of
an independent solicitor to aid in the solicitation of proxies, for a fee (not
anticipated to exceed $10,000) plus out-of-pocket costs and expenses.
A copy of the Company's Annual Report on Form 10-K, including financial
statements and financial statement schedules, for the year ended December 31,
2000 may be obtained without charge by writing to Marlton Technologies, Inc.,
2828 Charter Road, Philadelphia, Pennsylvania 19154, Attention: Alan I.
Goldberg, Corporate Secretary.
-44-
ANNEX I
Audit Committee Charter
Purpose
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Marlton Technologies, Inc.'s (the "Company")
financial reporting process, including by overviewing the financial reports and
other financial information provided by the Company to any governmental or
regulatory body, the public or other users thereof, the Company's systems of
internal accounting and financial controls, and the annual independent audit of
the Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
accountants or other experts for this purpose. The Board and the Committee are
in place to represent the Company's shareholders; accordingly, the outside
accountant is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership
The Committee shall be comprised of not less than three members of the Board,
and the Committee's composition will meet the requirements of the Audit
Committee Policy of the NASD/AMEX.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the
Committee.(1) In addition, at least one member of the Committee
will have accounting or related financial management expertise.(2)
------------
(1) According to the NASD/AMEX, "familiarity with basic finance and accounting
practices" requires that each such member of the Audit Committee be able to
read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement or will
become able to do so within a reasonable period of time after his or her
appointment.
(2) According to the NASD/AMEX, "accounting or related financial management
expertise" requires a member who has past employment experience in finance
or accounting, requisite professional certification in accounting, or any
other comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
A-1
Key Responsibilities
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside accountants are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management, as
well as the outside accountants, have more time, knowledge and more detailed
information on the Company than do Committee members; consequently, in carrying
out its oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the outside accountant's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o The Committee shall review with management and the outside accountants the
audited financial statements to be included in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K) and review and consider with the outside accountants the
matters required to be discussed by Statement of Auditing Standards ("SAS")
No. 61.
o As a whole, or through the Committee chair, the Committee shall review with
the outside accountants the Company's interim financial results to be
included in the Company's quarterly reports to be filed with Securities and
Exchange Commission and the matters required to be discussed by SAS No. 61;
this review will occur prior to the Company's filing of the Form 10-Q.
o The Committee shall discuss with management and the outside accountants the
quality and adequacy of the Company's internal controls.
o The Committee shall:
request from the outside accountants annually, a formal written statement
delineating all relationships between the accountant and the Company
consistent with Independence Standards Board Standard Number 1;
discuss with the outside accountants any such disclosed relationships and
their impact on the outside accountant's independence; and
recommend that the Board take appropriate action to oversee the independence
of the outside accountant.
o The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or nominate
for shareholder approval), evaluate and, where appropriate, replace the
outside accountant.
A-2
ANNEX II
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of August 23,
2001, is made and entered into by and among Scott Tarte ("Tarte") and Jeffrey
Harrow ("Harrow") (collectively, the "Investors"), Marlton Technologies, Inc., a
New Jersey corporation (the "Company"), and Marlton Technologies (PA), Inc. , a
newly formed Pennsylvania corporation that is a wholly owned subsidiary of the
Company (the "Surviving Corporation" and together with the Company, the "Marlton
Parties").
RECITALS
A. The Company will submit to its stockholders a proposal to
reincorporate in Pennsylvania as a Pennsylvania corporation by merging with and
into the Surviving Corporation pursuant to a certificate of merger in the form
set forth in Exhibit A-1 (the "Certificate of Merger") as a result of which each
outstanding share of the Company's common stock, par value $0.10 per share (the
"Company Common Stock") will be converted into one share of the Surviving
Corporation's common stock, without par value (the "Common Stock") (the
"Reincorporation") as a result of which the Surviving Corporation will have
articles of incorporation and by-laws as set forth in Exhibit A-2 and Exhibit
A-3 respectively hereto.
B. The Marlton Parties desire to issue to the Investors for $2,000,000
in the aggregate 4,000,000 shares (the "Shares") of the Surviving Corporation's
Common Stock and warrants (the "Warrants") to purchase 4,000,000 shares (the
"Warrant Shares") of the Surviving Corporation's Common Stock in the form of
Exhibit B hereto and the Investors desire to acquire such Shares and Warrants.
Now, therefore, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
ISSUANCE OF SHARES AND WARRANTS
Section 1.1 Issuance of Shares and Warrants. (a) Upon the terms and
subject to the conditions set forth in this Agreement, on or before the business
day which is three business days following the day on which all of the
conditions set forth in Article VII have been satisfied or waived (the "Closing
Date" or the "Closing"), the Surviving Corporation will issue, transfer and
convey the Shares and the Warrants to the Investors and simultaneously the
Investors will purchase the Shares and the Warrants from the Surviving
Corporation by paying the purchase price of Two Million Dollars ($2,000,000)
(the "Purchase Price") as follows:
1) Tarte will receive 2,000,000 Shares and 2,000,000 Warrants in
exchange for $1,000,000;
1
2) Harrow will receive 2,000,000 Shares and 2,000,000 Warrants in
exchange for $1,000,000;
(b) The Investors' ownership interest ("Ownership Interest")
will equal 4,000,000 divided by the number of shares of Common Stock issued and
outstanding immediately following the Closing. It is anticipated that the
Investors' Ownership Interest immediately following the Closing will be 31%.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE MARLTON PARTIES
As an inducement to the Investors to enter into this Agreement and to
consummate the transactions contemplated hereby, each Marlton Party hereby
jointly and severally represents and warrants to, and agrees with, the Investors
as follows, subject to approval of the Reincorporation and the transactions
contemplated hereby by the stockholders of the Company and the Surviving
Corporation and subject to such exceptions as are specifically disclosed in
writing in the disclosure schedule supplied by the Company to the Investors
dated as of the date hereof, which disclosure shall provide an exception to or
otherwise qualify the representations or warranties of the Marlton Parties
specifically referred to in such disclosure and such other representations and
warranties as to which the applicability of the disclosure is otherwise readily
evident (the "Disclosure Schedule"):
Section 2.1 Organization of the Company. (a) The Company is a New
Jersey corporation formed, validly existing and in good standing under the laws
of the State of New Jersey. The Company is qualified to do business and in good
standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires qualification and where the
failure to be so qualified would have a Material Adverse Effect. The Company has
full power and authority to own its assets and to carry on its business as now
conducted.
(b) The Surviving Corporation is a Pennsylvania corporation
formed, validly existing and in good standing under the laws of the State of
Pennsylvania. The Surviving Corporation is, or prior to the Closing will be,
qualified to do business and in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business requires
qualification and where the failure to be so qualified would have a Material
Adverse Effect. The Surviving Corporation has full power and authority to own
its assets and to carry on its business as now conducted.
(c) Except as set forth in Section 2.1(c) of the Disclosure
Schedule each subsidiary of either Marlton Party (other than the companies
listed on Section 2.1(d) of the Disclosure Schedule, the "Subsidiaries") is a
wholly owned subsidiary of the Company, validly existing and in good standing
under the laws of the state of incorporation listed opposite its name on Section
2.1(c) of the Disclosure Schedule and on the Closing Date will be a wholly owned
2
subsidiary of the Surviving Corporation, validly existing and in good standing
under the laws of such state. Each Subsidiary is qualified to do business and in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires qualification and where the
failure to be so qualified would have a Material Adverse Effect. Each Subsidiary
has full power and authority to own its assets and to carry on its business as
now conducted.
(d) Except as set forth on Section 2.1(d) of the Disclosure
Schedule the Marlton Parties have no subsidiaries or any equity ownership in any
other entity.
Section 2.2 Authority of the Company. Each Marlton Party has full legal
right, power, capacity and authority to execute and deliver this Agreement, the
Warrants, the registration rights agreement in the form set forth in Exhibit 2.2
(the "Registration Rights Agreement"), the employment agreements with Harrow and
Tarte substantially in the form of Exhibits 2.2 (a) and 2.2(b) (collectively,
the "Employment Agreements"), and all of the other agreements and instruments
required to be executed and delivered hereunder by a Marlton Party
(collectively, the "Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby and to comply with the terms, conditions and
provisions hereof and thereof. This Agreement and each other Transaction
Document constitutes, or upon its execution and delivery in accordance herewith
will constitute, the legal, valid and binding agreement of such Marlton Party
enforceable in accordance with their respective terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
Section 2.3 No Violation by the Company. The execution and delivery of
this Agreement by each Marlton Party, the performance by such Marlton Party of
its obligations hereunder and the consummation by such Marlton Party of the
transactions contemplated by this Agreement will not: (i) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any governmental authority or of any arbitration award
which is either applicable to, binding upon or enforceable against such Marlton
Party; (ii) conflict with, result in any breach of, or constitute a default (or
an event which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any material contract which is applicable to,
binding upon or enforceable against such Marlton Party; (iii) result in, or
require the creation or imposition of, any lien upon or with respect to any of
the property or assets of such Marlton Party; or (iv) require the consent,
approval, authorization or permit of, or filing with or notification to, any
governmental authority, any court or tribunal or any other Person (except the
SEC).
Section 2.4 No Finder. Neither the Marlton Parties nor any Person
acting on the Marlton Parties' behalf, has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
3
Section 2.5 Operations. Since June 30, 2001, there has not been any
material adverse change in the business, operations, financial position,
properties and other assets of the Marlton Parties and their Subsidiaries
(collectively, "Marlton") taken as a whole, and since such date, the business of
each has been conducted in the usual, regular and ordinary manner and shall
continue, through and including the Closing Date, to be conducted in such
manner, unless prior written approval for any variation therefrom shall have
first been secured from the Investors. For the period from June 30, 2001, to and
including the Closing Date, the following is and will be true with respect to
Marlton, and the operation of the business of Marlton:
(a) All material transactions involving Marlton have been
accurately and fully recorded or otherwise reflected in books and records of the
Marlton Parties;
(b) Marlton has not sold, exchanged, conveyed or otherwise
disposed, or subjected to lien, pledge, hypothecation, mortgage, or other
encumbrance, any material assets or properties other than in the ordinary course
of its business;
(c) Marlton has paid its material debts and liabilities,
including taxes, fees, levies and assessments in the ordinary course as they
have matured;
(d) Marlton has not incurred any material debt, obligation or
liability other than those incurred in the ordinary course of its businesses and
which do not or will not presently, with the passage of time or upon default,
subject Marlton's assets to any material lien, claim, charge, mortgage or other
encumbrance, nor has Marlton undertaken to guarantee in whole or in part, any of
the debts, obligations or liabilities of any other party;
(e) Marlton has not altered, amended, terminated or discharged
any material written or oral contract, lease, plan, commitment or agreement to
which Marlton is presently a party, nor permitted or consented to such
alteration, amendment, termination or discharge, nor has Marlton committed a
material breach or default in any of the provisions thereof;
(f) Marlton has not entered into any written or oral contract
except in the ordinary course of business at the prices and upon the terms
consistent with its past practices (or as contemplated by this Agreement) and
which do not violate any representation, warranty or covenant of this Agreement;
(g) Marlton has, to the Marlton Parties' Knowledge, complied
with all Laws applicable to the conduct of its business except where the failure
to so comply would not have a Material Adverse Effect;
(h) Marlton has conducted its business only in the usual,
regular and ordinary course and in substantially the same manner as theretofore
conducted;
(i) Marlton has maintained its properties and assets
substantially in accordance with past practice; and
4
(j) There has not occurred any transaction or event, nor is
any anticipated, which has had or will have a Material Adverse Effect except
such events and circumstances as affect the industry as a whole.
Section 2.6 Liabilities and Obligations of Marlton. Marlton has no
liabilities, direct or indirect, absolute or contingent, which are of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with generally accepted
accounting principles ("GAAP") which are, individually or in the aggregate,
material to the business, results of operations or financial condition of
Marlton taken as a whole, except (i) liabilities provided for in the June 30,
2001 financial statements referred to in Section 2.7 hereof or (ii) liabilities
arising in the ordinary course of business after June 30, 2001 which are not
material to the business, results of the operations or financial condition of
Marlton taken as a whole.
Section 2.7 Financial Statements. The consolidated balance sheet and
statements of cash flows, net income and changes in stockholders equity of
Marlton as of and for the year ended December 31, 2000 audited by
PricewaterhouseCoopers LLP, and interim financial statements for the period
ended June 30, 2001 (collectively, the "Financial Statements"), contained in the
SEC Reports were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, do not contain footnotes as permitted
by Form 10-Q of the Exchange Act), are materially accurate and each fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal adjustments which were not or are not expected to be material in amount.
Section 2.8 [Reserved]
Section 2.9 Title. Marlton has good and marketable title to all of its
material assets and leasehold interests, free and clear of all liens, charges,
claims, encumbrances and restrictions on transfers, except liens for taxes not
yet due and payable and such liens or other imperfections of title, if any, as
do not materially detract from the value of or materially interfere with the
present use of the property affected thereby.
Section 2.10 Right to Inspect the Properties and Records. Between the
execution of this Agreement and Closing, the Investors and their agents,
attorneys, accountants, employees, contractors and other authorized
representatives shall have the right, at any reasonable time and from time to
time as the Investors may reasonably deem appropriate, to examine the properties
and records of Marlton, and to make such tests, surveys, investigations and
other inspections in such manner as the Investors may deem necessary or
desirable. No investigation or examination by the Investors or any of their
agents or representatives of such properties and records of Marlton shall affect
the representations and warranties of the Marlton Parties contained in this
Agreement (except as set forth in Section 5.6 hereof).
5
Section 2.11 Insurance. (a) Marlton has in effect the insurance
coverage described in Section 2.11 of the Disclosure Schedule, and the Marlton
Parties have made available to the Investors complete and accurate copies of all
such insurance policies. Such insurance coverage, as to amounts and types of
coverage and risks insured, in the reasonable judgment of the Marlton Parties,
is adequate for their business as presently conducted.
(b) Section 2.11 of the Disclosure Schedule contains a list
and description of all claims made against the insurance policies held by
Marlton for the previous two (2) years, excepting therefrom claims made by
employees of Marlton against health insurance plan carriers.
Section 2.12 Litigation and Claims. There are no litigations, suits,
claims (other than claims for less than $2,000), demands (other than demands for
less than $2,000) or proceedings pending or to the Marlton Parties' Knowledge
threatened against Marlton, or its properties or assets, nor to the Marlton
Parties' Knowledge is there any meritorious basis for any such litigation, suit,
claim, demand or proceeding, nor is there in existence any judgment or award
against Marlton, relating to or affecting any of Marlton, or the properties or
assets of Marlton. To the Marlton Parties' Knowledge, Marlton, is not under
investigation by any governmental authority or self-regulatory organization for
violation of any law or regulation.
Section 2.13 Employment Obligations. Section 2.13 of the Disclosure
Schedule is Marlton's payroll run from the most recent payroll period and for
the year to date. All material agreements, contracts or understandings between
Marlton and its employees with respect to employment, wages, expenses,
allowances, vacations, hours, working conditions, bonuses, salaries, pensions,
profit sharing, medical benefits, insurance benefits, severance pay or otherwise
are described in Section 2.13 of the Disclosure Statement.
Section 2.14 Compliance with ERISA. (a) The Disclosure Schedule
identifies:
1. All "employee welfare benefit plans" and "employee
pension benefit plans" (as those terms are respectively defined in
Sections 3(l) and 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including any "multi-employer plan" (as
defined in Section 3(37) of ERISA)) of Marlton;
2. All retirement or deferred compensation plans,
incentive compensation plans, stock option plans, stock plans,
unemployment compensation plans, vacation pay, severance pay, bonus or
benefit arrangements, insurance or hospitalization programs and any
other fringe benefit arrangements (referred to collectively hereinafter
as "fringe benefit arrangements") of Marlton for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section 3(3) of
ERISA); and
3. All employment agreements not terminable on thirty (30)
or fewer days' written notice, without further liability.
6
(b) A true and correct copy of each of the plans, arrangements
and agreements listed on Section 2.14 of the Disclosure Schedule, and all
contracts relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements, each as in effect on the date hereof, have been made available to
the Investors by the Marlton Parties. In the case of any plan, arrangement or
agreement which is not in written form, the Investors have been provided with an
accurate description of such plan, arrangement or agreement as in effect on the
date hereof. A true and correct copy of the most recent annual report, actuarial
report, summary plan description and Internal Revenue Service determination
letter with respect to each such plan or arrangement, to the extent applicable,
and a current schedule of assets (and the fair market value thereof assuming
liquidation of any asset which is not readily tradable) held with respect to any
funded plan arrangement or agreement has been made available to the Investors by
the Marlton Parties, and there have been no material changes in the financial
condition in the respective plans from that stated in the annual reports and
actuarial reports made available to the Investors.
(c) As to all plans, arrangements and agreements of Marlton
listed in the Disclosure Schedule:
(1) All employee benefit plans and fringe benefit
arrangements comply and have been administered in form and in
operation, in all material respects, in compliance with all
requirements of law and regulation applicable thereto, and Marlton has
not received any notice from any governmental agency questioning or
challenging such compliance;
(2) All employee pension benefit plans comply in all material
respects in form and in operation with all applicable requirements of
Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); there have been no material amendments to such
plans which are not the subject of a determination letter issued with
respect thereto by the Internal Revenue Service; and to the Marlton
Parties' Knowledge no event has occurred which will or could give rise
to disqualification of any such plan under such sections or to a tax
under Section 511 of the Code;
(3) None of the assets of any employee benefit plan are
invested in employer securities or employer real property;
(4) To the Marlton Parties' Knowledge there have been no
"prohibited transactions" (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to any employee benefit plan and
Marlton has not otherwise engaged in any prohibited transaction;
(5) To the Marlton Parties' Knowledge as to any employee
pension benefit plan which is subject to Title IV of ERISA, there have
been no "reportable events" (as described in Section 4043 of ERISA),
and no steps have been taken to terminate any such plan;
7
(6) There have been no acts or omissions by Marlton which
have given rise to or, to the Marlton Parties' Knowledge, may give rise
to any material fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code, for
which Marlton may be liable;
(7) None of the payments contemplated by such plans,
arrangements and agreements would, in the aggregate, constitute excess
parachute payments as defined in Section 280G of the Code;
(8) There are no actions, suits or claims (other than routine
claims for benefits) pending or to the Marlton Parties' Knowledge
threatened involving such plans or the assets of such plans, and no
facts exist which could give rise to any such actions, suits or claims
(other than routine claims for benefits);
(9) All group health plans of Marlton (including any plans of
current and former affiliates of Marlton which must be taken into
account under Section 4980B of the Code or Section 601 of ERISA) have
been operated in material compliance with the group health plan
continuation coverage requirements of Section 4980B of the Code and
Section 601 of ERISA to the extent such requirements are applicable;
and
(10) To the Marlton Parties' Knowledge actuarially adequate
accruals for all obligations under such plans, arrangements and
agreements are reflected in the balance sheet of Marlton as of March
31, 2001 and each such plan has been fully funded for the most recent
plan year.
Section 2.15 Preservation of Business Relationships. Between the
execution of this Agreement and Closing, Marlton will use commercially
reasonable efforts to preserve the relationships of Marlton with its employees,
agents, customers, and others having business relationships with Marlton.
Section 2.16 Tax Returns. The Marlton Parties are taxed as a
corporation for Federal and state income tax purposes. All Federal, state and
local income, property, franchise, sales, use and other tax returns and reports
required by law to be filed by Marlton have been filed other than those returns
and reports of which the failure to file would have no Material Adverse Effect.
There are no liens for taxes affecting Marlton except for liens for taxes not
yet due and payable. The Marlton Parties have provided the Investors with true,
correct and complete copies of all federal and state tax returns filed since
January 1, 1998. The Marlton Parties have not executed or filed with the
Internal Revenue Service or any other taxing entity any agreement extending the
period for assessment and collection of any tax, nor is Marlton party to any
action or proceeding by any governmental authority for assessment or collection
of taxes, nor has any claim or assessment for collection of taxes been asserted
against Marlton which has not be satisfied.
Section 2.17 Material Agreements. Section 2.17 of the Disclosure
Schedule lists (or with respect to any oral agreement describes) all material
leases and licenses with respect to any property, real or personal (whether as
landlord, tenant, licensor or licensee), contracts, guarantees, mortgages,
indentures, agreements, understandings or other commitments, whether oral or
8
written, of Marlton, and the Marlton Parties have delivered to the Investors
complete and accurate copies of all such documents, each of which is in effect
and, to the Marlton Parties' Knowledge, is valid and enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
generally and by general principles of equity.
Section 2.18 Compliance with Laws. To the Marlton Parties' Knowledge,
Marlton's services, practices, billings, employee benefits, properties,
equipment, machinery, buildings used, and operations are in full compliance with
all applicable Federal, state and local laws, statutes, ordinances, codes,
regulations, rules, orders, restrictions and requirements, governmental,
administrative, judicial and otherwise, including, without limitation,
environmental laws and those relating to wages, securities, commodities, prices,
equal opportunity, safety, health, medical care, building and zoning, except
where the failure to so comply would not have a Material Adverse Effect.
Section 2.19 Licenses, Permits and Approvals. Marlton has all licenses,
permits, authorizations and approvals required of Marlton by any Federal, state
or local government's administrative or judicial authorities in connection with
the operation of its business as presently being conducted by Marlton, all of
which are in full force and effect except where the failure to have any of the
foregoing would not have a Material Adverse Effect.
Section 2.20 Ownership of Properties. Marlton owns or has a valid
leasehold interest in all properties, assets and facilities, both tangible and
intangible, real, personal and mixed which are used in and are material to the
conduct of Marlton's business.
Section 2.21 Intellectual Property. To the Marlton Parties' Knowledge,
Marlton has the right to use all trademarks, service marks, trade names,
copyrights, know-how, patents, trade secrets, licenses (including licenses for
the use of computer software programs), and other intellectual property of
Marlton necessary for the conduct of its business (the "Intellectual Property").
To the Marlton Parties' Knowledge, the conduct of the business of Marlton as
presently conducted, does not infringe or misappropriate any rights held or
asserted by any person, and to the Marlton Parties' Knowledge, no Person is
infringing on the Intellectual Property. To the Marlton Parties' Knowledge,
Marlton is not engaged in any kind of unfair or unlawful competition nor the
wrongful use of any confidential information or trade secrets or patentable
inventions of any former employee of Marlton or any other Person, firm or
corporation.
Section 2.22 Disclosure. No representation or warranty made herein by
the Marlton Parties and no written certificate or Schedule given or to be given
to the Investors pursuant to this Agreement on or before Closing contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein under the circumstances under which they were made not misleading, and
the Marlton Parties have made, and will make in good faith through the Closing
Date, full disclosure of all material facts with respect to Marlton including,
without limitation, the operations, assets and prospects of Marlton.
9
Section 2.23 [Reserved]
Section 2.24 [Reserved]
Section 2.25 Subsidiaries and Ownership of Stock. To the Marlton
Parties' Knowledge, Section 2.25 of the Disclosure Schedule sets forth a
complete and accurate list of (A) any Person owning more than 5% of the
outstanding stock of the Company. All of the outstanding capital stock or other
ownership interests of each Subsidiary has been validly issued and is fully paid
and nonassessable. The Company owns that percentage of the outstanding capital
stock of each Subsidiary set forth in Section 2.25 of the Disclosure Schedule,
free and clear of all liens, claims or encumbrances and on the Closing Date the
Surviving Corporation will own such percentages of the outstanding capital stock
of each Subsidiary, free and clear of all liens, claims or encumbrances. No
Subsidiary has any subsidiary.
Section 2.26 Environmental Matters. Marlton is in possession of and in
compliance in all material respects with all required permits and any federal,
state, or local statute, law, ordinance, regulation, rule, standard, permit or
requirement, including but not limited to those statutes, ordinances, laws,
regulations, rules, standards, permits and requirements promulgated under the
laws of the United States of America or any other nation, concerning or relating
to the protection of the environment ("Environmental Laws") relating to the
discharge or release of liquids, gases or solids into the air, water, and soil,
except for any such permit that, if not obtained, would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. No Marlton Party refines, processes, generates, stores, recycles,
transports, disposes of, or releases into the environment any "hazardous
substance" as that term is defined under Section 101(14) of the federal
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended from time to time ("CERCLA") or any hazardous or toxic substances as
those terms are defined by the provisions of any state or local environmental
statute or regulation, except to the extent the Marlton Parties do so in
material compliance with all applicable Environmental Laws. Marlton has not
received: (A) written notice from any governmental agency that it is a
potentially responsible party in any proceeding under CERCLA or any similar
state or local environmental statute or regulation, or (B) any written notice of
violation, citation, complaint, request for information, order, directive,
compliance schedule, notice of claim, proceeding or litigation from any party
concerning such Marlton Party's compliance with any Environmental Law which is
presently outstanding or unresolved, except for any notice or other
communication relating to any such non-compliance or proceeding that could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
Section 2.27 Licenses, Permits, etc. Marlton is in possession of and
operating in all material respects in compliance with all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders
required for the conduct of its business now conducted, and to the Marlton
Parties' Knowledge, all of them are valid and in full force and effect, except
to the extent the failure to possess or be in compliance with any of the
foregoing, or for any of the foregoing not to be valid and in full force and
effect, could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
10
Section 2.28 Labor Matters. There are no existing, or to the Marlton
Parties' Knowledge threatened strikes, slowdowns, picketing or work stoppages by
any employees against Marlton, any lockouts by Marlton of any of its employees
or any other occurrence, event or condition of a similar character affecting or
which may affect Marlton that could reasonably be expected to have a Material
Adverse Effect.
Section 2.29 Outstanding Judgments or Orders. Marlton has satisfied all
judgments against it that could reasonably be expected to have a Material
Adverse Effect and there is no default with respect to any judgment, writ,
injunction, decree, material rule or regulation of any court, arbitrator or
commission, board bureau, agency or instrumentality, domestic or foreign that
could reasonably be expected to have a Material Adverse Effect.
Section 2.30 No Defaults on Other Agreements. Marlton is not in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party, except for any such default that could not reasonably be expected to
have a Material Adverse Effect.
Section 2.31 SEC Filings; Financial Statements. (a) Each Marlton Party
has made all filings required to be filed by it under the Securities Act or the
Exchange Act since January 31, 1997 through the date of this Agreement
(collectively, the " SEC Reports"). The SEC Reports were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be. None of the SEC Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No security of any Subsidiary is required to be
registered pursuant to Section 12(b) or 12(g) of the Exchange Act (except for
those of the Surviving Corporation which shall be registered prior to the
Reincorporation).
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INVESTORS
As an inducement to the Marlton Parties to enter into this Agreement
and to consummate the transactions contemplated hereby, each Investor hereby
severally represents and warrants to, and agrees with, the Marlton Parties as
follows:
Section 3.1 Authority. Such Investor has full legal right, power,
capacity and authority to execute and deliver this Agreement and all of the
other agreements and instruments contemplated hereby, to consummate the
transactions contemplated hereby and thereby and to comply with the terms,
conditions and provisions hereof and thereof.
Section 3.2 No Violation. The execution and delivery of this Agreement,
the performance of the obligations hereunder and the consummation by such
Investor of the transactions contemplated by this Agreement will not: (i)
violate or conflict with any law, statute, ordinance, rule, regulation, decree,
writ, injunction, judgment or order of any governmental authority or of any
11
arbitration award which is either applicable to, binding upon or enforceable
against such Investor; (ii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any contract which is
applicable to, binding upon or enforceable against such Investor; (iii) result
in, or require the creation or imposition of, any lien upon or with respect to
any of the property or assets of such Investor; or (iv) require the consent,
approval, authorization or permit of, or filing with or notification to, any
governmental authority, any court or tribunal or any other Person.
Section 3.3 No Finder. Neither such Investor nor any party acting on
its behalf has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.
Section 3.4 Securities Law Matters. (a) Such Investor acknowledges that
it is making an investment by way of a private placement in the Surviving
Corporation based upon negotiations between it and representatives of the
Marlton Parties. Such Investor has received, read and is familiar with
information relating to the Marlton Parties which has been provided to such
Investor or which is available in the Marlton Parties' filings with the SEC.
Apart from information provided by the Marlton Parties or which is available in
the Marlton Parties' filing with the SEC, such Investor has not relied on any
other statements made to such Investor by any other Person for purposes of
entering into this Agreement. Furthermore, such Investor has been given an
opportunity to consult professional advisors regarding this investment.
(b) Such Investor has been provided with all materials and
information requested by either it, its counsel, or others representing the
Investors, including any information requested to verify information furnished,
and there has been direct communication between such Investor and its
representatives and advisors on the one hand, and the Marlton Parties and its
representatives and advisors on the other, in connection with the information
provided to such Investor or otherwise available to such Investor and its
advisors who have also had the opportunity to ask questions of, and receive
answers from the Marlton Parties and its directors, officers, and
representatives concerning the terms and conditions of this issuance.
(c) Such Investor is acquiring its Shares and Warrants for its
own account and for investment purposes only and has no present intention,
agreement or arrangement for the distribution, transfer, assignment, resale or
subdivision thereof.
(d) Such Investor is an "accredited investor," as such term is
defined in Rule 501 promulgated under the Securities Act.
(e) Such Investor, either alone or with such Investor's
advisers, has such knowledge and experience in financial and business matters
that such Investor is capable of evaluating the merits and risks of the
investment to be made hereunder and he understands that an investment in the
Surviving Corporation involves a high degree of risk, and such Investor is able
to bear the entire economic risk of such investment.
12
(f) Such investor is familiar with and understands the terms
and risks of an investment in the Surviving Corporation, including the
substantial restrictions on transferability.
(g) Such investor understands that (i) none of the Shares
which are being purchased pursuant to this Agreement or the Warrant Shares have
been registered under the Securities Act by reason of a specific exemption
therefrom, and such Shares and Warrant Shares may not be transferred or resold
except pursuant to an effective registration statement or exemption from
registration, and (ii) each certificate representing the Shares or Warrant
Shares will be endorsed with the following legends:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(h) None of the information supplied in writing by either
Investor specifically for inclusion in the Proxy Statement (as defined in
Section 4.3 hereof) including all amendments and supplements thereto, shall, at
the date thereof and at the date of the meeting of the Company's stockholders to
vote on the matters covered thereby, contain any untrue statement of a material
fact, or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading.
(i) Such Investor further understands and agrees that the
Shares, the Warrants and the Warrant Shares issued hereunder may not be offered,
sold, transferred, pledged or hypothecated to any persons in the absence of
registration under the Securities Act and applicable state securities laws, or
an opinion of counsel satisfactory to the Surviving Corporation that such
registration is not required.
ARTICLE IV
COVENANTS
Section 4.1 Further Assurances; Additional Agreements. At any time and
from time to time hereafter, each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
13
Section 4.2 Other Subscription Agreement. Prior to or at the Closing,
the Marlton Parties shall enter into a subscription agreement (the "Other
Subscription Agreement") in the form of Exhibit 4.2 hereto with Ginsburg and
Goldberg.
Section 4.3 Proxy Statement, Shareholder Approval and Merger. (a) With
reasonable and practicable promptness after the execution of this Agreement, and
after receiving from the Investors all information reasonably required by the
Marlton Parties, the Company shall prepare and file with the SEC a proxy
statement relating to the meeting of the Company's stockholders at which
approval will be sought for the Reincorporation and the transactions (such
transactions, excluding the Reincorporation, the "Subject Transactions")
contemplated by the Transaction Documents to the extent required by the
Securities Act, the Exchange Act and the American Stock Exchange (together with
any amendments thereof or supplements thereto, the "Proxy Statement"). The
Marlton Parties shall provide copies of the Proxy Statement to the Investors
prior to filing with the SEC and the Marlton Parties will consider the
Investor's requests to modify the Proxy Statement. The Proxy Statement will
include the independent committee (the "Independent Committee") of the Company's
Board of Directors' recommendation that the Company's stockholders approve the
Reincorporation and the Subject Transactions. As promptly as practicable
thereafter and subject to receiving all requisite approvals from all
Governmental Entities, the Company will mail the Proxy Statement to its
stockholders.
(b) The information regarding Marlton in the Proxy Statement
shall not, at (i) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (ii) the
time of the Company's Stockholders' Meeting (as hereinafter defined), and (iii)
the Closing, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. If at any time prior to the Closing any
event or circumstance relating to Marlton should be discovered by Marlton which
should be set forth in an amendment or a supplement to the Proxy Statement, the
Marlton Parties shall promptly inform the Investors. All documents that the
Company is responsible for filing with the SEC in connection with the
transactions contemplated hereby will comply as to form and substance in all
material aspects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The Marlton Parties will make all filings (collectively
the "Future SEC Reports") with the SEC that they are required to make between
the date of this Agreement and the Closing Date under the Exchange Act. Each of
the Future SEC Reports will comply with the requirements of the Exchange Act in
all material respects.
(d) The Company shall call and hold a meeting of its
stockholders (the "Stockholders' Meetings") within 30 Business Days following
the date when the SEC authorizes Company to distribute definitive proxy
materials promptly for the purpose of voting upon the approval of the
Reincorporation and the Subject Transactions. The Marlton Parties shall use
commercially reasonable efforts to solicit from the Company's stockholders
proxies in favor of the approval of the Reincorporation and the Subject
Transactions.
14
(e) If the Reincorporation is not approved by the stockholders
at the Stockholders' Meeting, the Reincorporation will not occur, and instead
the following changes to the transactions contemplated by the Transaction
Documents will be effectuated:
(1) Each Share will henceforth be one share of Company Common
Stock so that the Shares will be issued by the Company and
the Investors will pay the subscription price to the
Company;
(2) Each Warrant will be issued by the Company for shares of
Company Common Stock;
(3) The number of directors will be increased to seven, two
directors will resign as directors of the Company and the
Company will appoint four directors to be designated by
the Investors;
(4) The Company will assume the obligations to register the
Shares and the Warrant Shares (i.e. the Registration
Rights Agreement will be amended to make the Company into
the "Company" as such term is used therein);
(5) The Company will assume all of the obligations of the
Surviving Corporation;
(6) The representations and warranties and the covenants will
be deemed to reflect the above changes;
(7) The Parties will make such other changes as they deem
appropriate to most closely effectuate the intent of the
parties hereunder;
(8) The Company will amend its bylaws to reflect a division of
responsibility between its Chairman of the Board, Vice
Chairman of the Board and Chief Executive Officer similar
to those in the by-laws set forth in Exhibit A-2; and
(9) Analogous changes will be made with respect to the Other
Subscription Agreement.
Section 4.4 Transfer of Shares to Comply with Securities Act;
Registration Rights. The Shares may not be sold or otherwise disposed of except
as follows: (1) to a Person who, in the opinion of counsel reasonably acceptable
to the Surviving Corporation, is a Person to whom the Shares may legally be
transferred without registration and without the delivery of a current
prospectus under the Securities Act with respect thereto, and against receipt of
an agreement of such Person to comply with the obligations of the Company
pursuant to this Agreement with respect to the Shares, which agreement shall be
reasonably satisfactory in form and substance to the Surviving Corporation; or
(2) to any Person upon delivery of a prospectus then meeting the requirements of
the Securities Act relating to such securities and the offering thereof for such
sale or disposition or (3) a sale pursuant to Rule 144 under the Securities Act.
Section 4.5 The Listing. The Marlton Parties shall cause the Shares to
be listed on the American Stock Exchange prior to the Closing or as soon
thereafter as is commercially reasonable.
15
Section 4.6 Conduct of Business by the Marlton Parties Pending the
Closing. The Marlton Parties agree that, between the date of this Agreement and
the earlier of the Closing or the date this Agreement is terminated under
Section 8.2 hereof except as contemplated by any other provision of this
Agreement, unless the Investors shall otherwise agree in writing, the business
of Marlton shall be conducted only in, and the Marlton Parties and the
Subsidiaries (not including those set forth in Section 2.1(d) of the Disclosure
Schedule) shall not take any action except in, the ordinary course of business
consistent with past practice. By way of amplification and not limitation,
except as set forth in Section 4.6 of the Disclosure Schedule or as contemplated
by any other provision of this Agreement, the Board of Directors of the Marlton
Parties shall not (unless required by applicable Laws or stock exchange
regulations) cause or permit Marlton, or any of its officers, directors,
employees and agents acting on behalf of Marlton, to, between the date of this
Agreement and the Closing or the date this Agreement is terminated under Section
8.2 hereof, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of the Investors, which consent shall not be
unreasonably withheld or delayed:
(a) amend or otherwise change its certificate or articles of
incorporation or by-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of, (i)
any shares of capital stock of Marlton of any class, or securities convertible
or exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of Marlton (other than the issuance of shares issued upon
the exercise of options set forth in Schedule 4.6) or (ii) any property or
assets of Marlton, except in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any division
thereof or any assets, other than acquisitions of assets in the ordinary course
of business consistent with past practice for consideration that are not, in the
aggregate, in excess of $25,000; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person for borrowed
money, except for indebtedness for borrowed money incurred in the ordinary
course of business and consistent with past practice or incurred to refinance
outstanding indebtedness for borrowed money existing on the date of this
Agreement; (iii) terminate, cancel or request any material change in, or agree
to any material change in any material contract or enter into any contract or
agreement material to the business, results of operations or financial condition
16
of Marlton taken as a whole, in either case other than in the ordinary course of
business, consistent with past practice; (iv) make or authorize any capital
expenditure, other than capital expenditures that are not, in the aggregate, in
excess of $25,000 for Marlton taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 4.6(e);
(f) increase the compensation payable or to become payable to
its officers except in the ordinary course of business at times and in amounts
consistent with past practice, or grant any rights to severance or termination
pay to, or enter into any employment or severance agreement with, any director
or officer of Marlton, or establish, adopt, enter into or amend any bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement or arrangement for the benefit of any director or officer,
except to the extent required by applicable Law or the terms of any Benefit Plan
currently in effect;
(g) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice;
(h) waive, release, assign, settle or compromise any material
claims or litigation;
(i) enter into or amend any material agreement with, or make
any loan or advance to any officers or directors of Marlton;
(j) authorize or enter into any agreement or otherwise make
any commitment to do any of the foregoing.
Section 4.7 Contractual Consents. Prior to or at the Closing, each of
the Marlton Parties shall use commercially reasonable efforts to obtain all
consents required in connection with the Reincorporation and the transactions
contemplated hereby. The Marlton Parties shall use commercially reasonable
efforts to obtain (i) a written consent of First Union National Bank ("First
Union"), as agent under the Amended and Restated Revolving Credit and Security
Agreement (as amended, the"Credit Agreement") dated as of January 31, 2000 in
form and substance reasonably satisfactory to the Investors in which First Union
consents to the Reincorporation and the transactions contemplated by the
Transaction Documents and (ii) a written acknowledgement of 2828 Partnership
L.P. ("2828") in form and substance reasonably satisfactory to the Investors in
which 2828 acknowledges that consummation of the Reincorporation will not
constitute a Change of Control of the Company, as such term is defined in
Section 7.A (iv) of the Lease Agreement (the "Lease") dated as of May 17, 1999,
as amended, by and between the Company and 2828 (such consent and such
acknowledgement, the "Specified Consents")
Section 4.8 Employment Matters. At the Closing, the Marlton Parties
shall execute and deliver the Employment Agreements with the Investors, and an
17
additional employment agreement (the "Additional Employment Agreement") in the
form of Exhibit 4.8(a) with Ginsburg.
Section 4.9 Appropriate Action; Consents; Filings. (a) The Marlton
Parties shall use commercially reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Marlton in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein, including, without limitation, the Reincorporation, and (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Reincorporation required under (A) the
Securities Act and the Exchange Act, and any other applicable federal or state
securities Laws and (B) any other applicable Law; provided that the Investors
and the Marlton Parties shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filing and considering all
reasonable additions, deletions or changes suggested in connection therewith.
The Marlton Parties and the Investors shall furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
(b) From the date of this Agreement until the earlier of the
Closing or the date this Agreement is terminated under Section 8.2 hereof, the
Marlton Parties shall promptly notify the Investors in writing of any pending
or, to the Marlton Parties' Knowledge, threatened action, proceeding or
investigation by any Governmental Entity or any other Person (i) challenging or
seeking damages in connection with the Reincorporation and the transactions
contemplated by the Transaction Documents, or (ii) seeking to restrain or
prohibit the consummation of the Reincorporation and the transactions
contemplated by the Transaction Documents or otherwise limit the right of the
Investors, or (iii) asserting or to the best knowledge of the Marlton Parties
threatening to assert dissenter's rights under the Business Corporation Law of
Pennsylvania or the Business Corporation Act of New Jersey, as applicable .
Section 4.10 Confidentiality. Each Investor will maintain in
confidence, and cause its agents and advisors to maintain in confidence, and not
use for its own benefit or to the detriment of Marlton any written, oral or
other information obtained from Marlton in connection with this Agreement or the
transactions contemplated hereby unless (i) such information is known to others
not bound by a duty of confidentiality, (ii) such information becomes publicly
available through no fault of either Investor, (iii) such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the transactions contemplated hereby,
or (iv) the furnishing or use of such information is required by applicable law
or any proceeding. In the event that an Investor is at any time requested or
required (by oral questions, interrogatories, request for information or
documents, subpoena or other similar process) to disclose any information
supplied to it in connection with this transaction, such Investor agrees to
provide the Company prompt notice of such request so that an appropriate
protective order may be sought. If the transactions contemplated by this
Agreement are not consummated, the Investors will return or destroy all
18
information obtained from the Company and will certify to the Company as to
their compliance with this provision.
Section 4.11 Fairness Opinion. The Company will use commercially
reasonable efforts to obtain an opinion (the "Fairness Opinion") of a reputable
investment banker (with the Parties agreeing that Gruntal & Co. is such an
investment banker) to the effect that the consideration to be paid for the
Shares and the Warrants is fair from a financial point of view to the
shareholders of the Company (except for standard qualifications ).
Section 4.12 Update Disclosure Schedule. The Disclosure Schedule may be
supplemented by the Marlton Parties with respect to events occurring following
the date hereof, in which case the Investors shall be entitled to terminate the
Agreement at any time prior to the Closing if the adverse effect to the Company
of breaches of representations and warranties of the Marlton Parties contained
in this Agreement and the matters disclosed in the supplement would equal
$200,000 or more in the aggregate, but if the Investors do not so terminate the
Agreement the Investors shall not be entitled to indemnification with respect to
losses on account of such matters disclosed in such supplements.
Section 4.13. Appointment of the new board of directors to the
Surviving Corporation. The Surviving Corporation agrees that if the
Reincorporation is approved by the Company's stockholders at the Company's
Stockholders' Meeting, the sole director of the Surviving Corporation will
immediately (and prior to the filing of the Certificate of Merger) (i) increase
the size of the Surviving Corporation's board of directors to seven directors,
(ii) appoint the Investors, Ginsburg, Goldberg, Richard Vague, A.J. Agarwal and
Fred Cohen to the Surviving Corporation's board of directors and (iii) resign.
The Investors agree to accept such appointment and to use their best efforts to
get Richard Vague and A.J. Agarwal to accept such appointment.
ARTICLE V
SURVIVAL OF REPRESENTATIONS AND WARRANTIES, INDEMNIFICATION
Section 5.1 Survival of Representations and Warranties. Any
investigation or examination by either the Investors, on the one hand, or the
Marlton Parties on the other hand, of the business, or properties or affairs of
the other or others shall not affect the representations and warranties of such
persons or entities set forth herein (except as set forth in Section 5.6). The
representations and warranties herein made by the parties shall survive the
Closing Date for one year following the Closing Date except for the
representations and warranties made by the parties in Sections 2.2 and 2.26 and
Section 3.4 which shall survive the Closing Date for six years following the
Closing Date (the "Survival Period").
Section 5.2 Indemnification by the Marlton Parties. Subject to Section
5.6, the Marlton Parties agree jointly and severally to indemnify and hold the
Investors harmless from and against (A) all liability, loss, judgments, demands,
claims, actions, assessments, penalties, damages, cost or expense, including,
without limitation, attorneys' fees, expenses and costs of litigation other than
any liability, loss, judgment, demand, claim, action, assessment, penalty,
damage, cost or expense of less than $2,000, including the losses that would
have been realized by a buyer acquiring all of the Marlton Parties' assets and
assuming all of its liabilities pursuant to an agreement containing the same
representations and warranties of the Marlton Parties as those contained herein
(e.g. the differences between the financial statements if the representation had
been accurate and the financial statements as a result of the inaccuracy)
multiplied by (B) the Ownership Interest ("Losses"), the Investors and/or any
such person may sustain by reason of either of the following:
19
(a) The inaccuracy of any representation or warranty of the
Marlton Parties herein set forth, in the Disclosure Schedules (or any
supplement thereto) or in any certificate required to be delivered by
the Marlton Parties to the Investors in accordance with the terms
hereof (provided, however, that for purposes of this Section the
representations and warranties will be deemed to exclude all
"materiality" qualifiers however designated (e.g., excluding
"material," "materially" and like terms, and "which are material,"
"which are immaterial" or "which are not material" and like phrases),
and "Material Adverse Effect" will be deemed to mean "adverse effect");
and
(b) The breach of any of the agreements or covenants of the
Marlton Parties contained in this Agreement.
Notwithstanding the foregoing, the amount of any Losses shall be
reduced (i) to the extent any such Loss is covered by third party insurance
(less any applicable deductible amount) carried by the Marlton Parties or either
of them, and (ii) to give effect to the tax effect (other than timing
differences) to the Marlton Parties or either of them and their respective
successors and affiliates of any such damage, claim, deficiency, loss,
liability, obligation or reasonable expense.
Section 5.3 Indemnification by the Investors. Each Investor severally
agrees to indemnify and hold the Marlton Parties harmless from and against all
Losses which the Marlton Parties sustain by reason of any of the following:
(a) The inaccuracy of any representation or warranty of such
Investor herein set forth or in any certificate required to be
delivered by such Investor to the Marlton Parties in accordance with
the terms hereof; and
(b) The breach of any of the agreements or covenants of such
Investor contained in this Agreement.
Section 5.4 Recovery by the Investors. In the case of any recovery by
the Investors from the Marlton Parties following the Closing Date the Investors
shall be paid, at the option of the Marlton Parties, in cash or in Additional
Shares and Replacement Warrants. Additional Shares means that number of
additional shares of Common Stock (the "Additional Shares") purchasable at $.50
per share for the amount to which the Investors are entitled pursuant to this
Article V. Replacement Warrants mean warrants that will replace the Warrants
(which will be cancelled) and which will entitle the holder to purchase the
number of shares of Common Stock equal to the number of Shares plus the number
of Additional Shares, and each such Replacement Warrant shall have an exercise
price of $.50 but otherwise be identical to the Warrants; to the extent any
Warrants have been exercised prior to the cancellation of Warrants, appropriate
adjustment shall be made to the number of Replacement Warrants issued and
additional shares of Common Stock will be issued to the holders of the Warrant
Shares as if the Warrants had been exercised following their replacement with
Replacement Warrants and the holder had exercised such number of Replacement
Warrants as would be exercisable with the exercise price actually paid when such
Warrants had been exercised.
20
Section 5.5 Certain Other Indemnity Matters. From and after the Closing
the sole and exclusive remedies of the parties hereto with respect to any and
all claims relating to the inaccuracy of any representation or warranty, and
breaches of the agreements and covenants, contained in this Agreement shall be
pursuant to the indemnification provisions set forth in this Article V,
provided, however, that nothing herein shall restrict the remedies of the
parties hereto with respect to any claims relating to the other Transaction
Documents. In furtherance of the foregoing, the parties hereby agree, on their
own behalf to waive, to the fullest extent permitted under applicable law, and
agree not to assert in any action or proceeding of any kind, any and all rights,
claims and causes of action they may now or hereafter have against the other
parties relating to the inaccuracy of any representation or warranty, and breach
of any agreement or covenant, other than claims for indemnification asserted as
permitted by and in accordance with the provisions set forth in this Section 5.5
(including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or other legal requirements).
Section 5.6 Limitations upon Indemnification. The Investors shall not
be entitled to recover under Section 5.2 for Losses to the extent such Losses do
not exceed (i) $200,000 plus (ii) the Additions (as defined below) in the
aggregate and then only as to such excess and the Marlton Parties shall not be
entitled to recover under Section 5.3 for Losses to the extent such Losses do
not exceed $200,000 in the aggregate and then only as to such excess. Neither
Investor may bring a claim for indemnification based on the breach of a
particular representation or warranty if, at the time hereof, either Investor
had actual knowledge of the breach of such representation or warranty, provided,
however, that nothing herein shall reduce the parties' rights to terminate the
Agreement. In addition, neither Investor may bring a claim for indemnification
based on the breach of a particular representation or warranty with respect to
matters disclosed following the date hereof with respect to events occurring
following the date hereof if either Investor had actual knowledge of such breach
at the Closing Time, provided, however, that nothing herein shall reduce the
parties' rights to terminate the Agreement. Neither Marlton Party may bring a
claim for indemnification based on the breach of a particular representation or
warranty if, at the time hereof, an officer of a Marlton Party had knowledge of
the breach of such representation or warranty, provided, however, that nothing
herein shall reduce the parties' rights to terminate the Agreement. The
"Additions" are any assets of the Marlton Parties existing as of June 30, 2001
or relating to the operations of Marlton's business prior to June 30, 2001 that
are not reflected in the June 30, 2001 consolidated balance sheet of the Company
included in the Financial Statements (other than any asset of less than $2,000).
ARTICLE VI
CLOSING DOCUMENTS
Section 6.1 Documents to Be Delivered by the Marlton Parties. The
Marlton Parties agree to deliver to the Investors on the Closing Date the
following:
21
(a) Certificates as to Certain Documents. Certificates of the
authorized executive officers of each Marlton Party dated the Closing Date with
respect to (i) the By-laws of such Marlton Party, (ii) the resolutions
authorizing the transactions contemplated by the Transaction Documents, and
(iii) the incumbency of certain officers of such Marlton Party and the specimen
signatures of those officers of such Marlton Party executing documents.
(b) Certificates of Incorporation. Certificates or articles of
incorporation, and all amendments thereto, of the Marlton Parties certified by
the Secretary of State of New Jersey or Pennsylvania, as appropriate, as of a
date not more than thirty (30) days prior to the Closing Date.
(c) Good Standing Certificates. Certificates of good standing
for the Marlton Parties issued by the Secretary of State of Pennsylvania and the
Secretary of State of New Jersey dated not more than thirty (30) days prior to
the Closing Date.
(d) Counsel Opinion. An Opinion reasonably satisfactory to the
Investors of New Jersey and Pennsylvania counsel for the Marlton Parties
reasonably satisfactory to the Investors addressed to the Investors, dated the
Closing Date.
(e) Registration Rights Agreement. The Registration Rights
Agreement in the form set forth in Exhibit 2.2 executed by the Marlton Parties.
(f) Consent to Issuance. The Specified Consents and all other
consents of third parties which are necessary, in the reasonable opinion of the
Investors, to (i) effectively issue the Shares and Warrants in the manner
provided for herein, and (ii) cause agreements and leases not to be canceled or
modified in form and substance reasonably satisfactory to said Investors'
counsel unless waived in writing by the Investors.
(g) Warrants. The Warrants executed by the Marlton Parties.
(h) Bring Down Certificates. Certificates of the authorized
executive officers of each Marlton Party dated the Closing Date to the effect
that (i) each of the representations and warranties of the Marlton Parties
contained in this Agreement (subject to updates to the Disclosure Schedule with
respect to events occurring following the date hereof) is true and correct in
all material respects as of the Closing Time, except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct in all material respects as of such date, and (ii) the Marlton
Parties have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date.
(i) Share Certificates. Certificates representing the Shares.
(j) Employment Agreements. The Employment Agreements executed
by the Marlton Parties.
(k) Other Documents. Such other documents and showings as
shall reasonably be required by the Investors and their counsel.
22
Section 6.2 Documents to Be Delivered by the Investors. The Investors
agree to deliver to the Marlton Parties on the Closing Date the following:
(a) Subscription Price. $2,000,000.00 in cash.
(b) Counsel's Opinion. An opinion reasonably satisfactory to
the Marlton Parties of counsel for the Investors reasonably
satisfactory to the Marlton Parties (provided that Robinson Brog
Leinwand, Greene, Genovese & Gluck shall be satisfactory to the Marlton
Parties) addressed to the Marlton Parties dated the Closing Date.
(c) Registration Rights Agreement. The Registration Rights
Agreement executed by the Investors.
(d) Warrants. The Warrants executed by the Investors.
(e) Bring Down Certificates. Certificates of each Investor
dated the Closing Date to the effect that (i) each of the
representations and warranties of such Investor contained in this
Agreement is true and correct in all material respects as of the
Closing Date, except that those representations and warranties which
address matters only as of a particular date shall remain true and
correct in all material respects as of such date, and (ii) such
Investor has performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by him on or prior to the Closing Date.
(f) Employment Agreements. The Employment Agreements executed
by the Investors.
(g) Other Documents. Such other documents and showings as
shall reasonably be required by the Marlton Parties and their counsel.
23
ARTICLE VII
CONDITIONS TO CLOSING.
Section 7.1 Conditions to the Obligations of All Parties. The
respective obligations of each party to effect this Agreement and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any or all of which, except as
otherwise stated herein, may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) No governmental entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits the transactions
contemplated in this Agreement.
(b) None of the Transaction Documents shall have been modified
or terminated or challenged in court.
(c) The Subject Transactions shall have been approved by the
stockholders of the Company, which condition cannot be waived.
Section 7.2 Conditions to the Obligations of the Marlton Parties. The
obligations of the Marlton Parties to effect the transactions contemplated by
the Transaction Documents are also subject to the following conditions:
(a) Each of the representations and warranties of the
Investors contained in this Agreement shall be true and correct in all material
respects as of the Closing, except that those representations and warranties
which address matters only as of a particular date shall remain true and correct
in all material respects as of such date. The Investors shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing.
(b) The receipt by the Marlton Parties of the Fairness
Opinion.
(c) The execution by the Investors of the stockholder
agreement in the form of Exhibit 7.2(c) (the "Stockholder Agreement").
Section 7.3 Conditions to the Obligations of the Investors. The
obligations of the Investors to effect the transaction contemplated by the
Transaction Documents are also subject to the following conditions:
(a) Each of the representations and warranties of the Marlton
Parties contained in this Agreement (subject to updates to the Disclosure
Schedule with respect to events occurring following the date hereof) shall be
true and correct in all material respects as of the Closing, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct in all material respects as of such date.
Each of the Marlton Parties shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing.
24
(b) At or prior to the Closing, all filings necessary under
federal and state securities laws to permit the issuance and delivery of the
Shares and Warrants in connection with the Agreement in compliance with such
laws shall have been made, and any authorizations in connection therewith from
all applicable securities regulatory authorities shall have been obtained.
(c) As of the Closing, there shall not have been a Material
Adverse Effect with respect to the Marlton Parties.
(d) The consummation of the transactions contemplated by the
Other Subscription Agreement.
(e) The execution by Ginsburg and the Surviving Corporation of
the Stockholders Agreement.
(f) The delivery of all of the consents provided for in
Section 6.1(f) and Marlton being in compliance with all of the covenants
contained in Sections 6.24, 6.25 and 6.26 of the Credit Agreement for its most
recent fiscal quarter for which financial statements are available.
ARTICLE VIII
TERMINATION; BREAK-UP FEES
Section 8.1. No Solicitation of Transactions by the Marlton Parties.
(a) The Marlton Parties immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to a Competing Transaction (as defined below) from the date hereof until
the earlier of (i) the Closing, or (ii) the termination of this Agreement in
accordance with its terms (the "Period"). During the Period, the Marlton Parties
shall not, directly or indirectly, and each will instruct its Subsidiaries,
officers, directors, employees, agents, advisors and other representatives
(including, without limitation, any investment banker, attorney and accountant
retained by it) (collectively "Representatives"), not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, (ii) enter
into or maintain or continue discussions or negotiate with any Person or entity
in furtherance of such inquiries, (iii) agree to or endorse any Competing
Transaction, or (iv) authorize or knowingly permit any Representative of such
party or any of its Subsidiaries to take any such action. If any proposal or
offer, or any inquiry or contact with any Person with respect thereto, regarding
a Competing Transaction is made to any Marlton Party (any party which receives
25
such a proposal, other inquiry or contact is hereafter referred to as the
"Receiving Party"), such Receiving Party promptly shall notify the Investors.
(b) Notwithstanding anything to the contrary in Section 8.1(a)
above, the Board of Directors of such Receiving Party may cause such Receiving
Party to furnish information to, and may participate in discussions or
negotiations with, any Person that, without any solicitation by or on behalf of
such Receiving Party, has submitted a written proposal to such Board of
Directors which constitutes a Superior Proposal (as hereafter defined, except
that for purposes of this Section 8.1(b) a Superior Proposal shall not require a
financing commitment), to the extent that the Board of Directors of such
Receiving Party determines in good faith that the failure to do so would cause
such Board of Directors to breach its fiduciary duties to the Receiving Party or
its stockholders under applicable Laws if the Receiving Party has received
advice to such effect from independent legal counsel (who may be such party's
regularly engaged independent legal counsel). Notwithstanding anything to the
contrary contained in this Agreement, any such furnishing of information and
participation in such discussions or negotiations shall not constitute a breach
of this Agreement by such party.
(c) A "Competing Transaction" means any of the following
involving the Marlton Parties (other than the Reincorporation and the
transactions contemplated by the Transaction Documents): (i) a merger,
consolidation, share exchange, business combination or other similar transaction
as a result of which the stockholders of such party immediately prior to such
transaction will, after such transaction, own less than 50% of the voting stock
of the combined, surviving or merged entity; (ii) any sale, lease, exchange,
transfer or other disposition of 50% or more of the assets of such party and its
subsidiaries, taken as a whole; (iii) a tender offer or exchange offer for, or
any acquisition of, 50% or more of the outstanding voting securities of such
party by a Person not affiliated with any party hereto; (iv) any issuance of
securities of either Marlton Party or any subsidiary of a Marlton Party for more
than $2,000,000; or (v) any incurence of debt of either Marlton Party or any
subsidiary of a Marlton Party of more than $2,000,000.
(d) A "Superior Proposal" shall mean any proposal made by a
third party for a Competing Transaction with either Marlton Party which the
Board of Directors of such party reasonably determines in its good faith
judgment (based on the advice of a financial advisor and independent counsel) to
be more favorable to such party's stockholders than the transactions
contemplated by the Transaction Documents and for which financing, to the extent
required, is then committed, subject to standard terms and conditions at the
time the applicable Marlton Party, exercises any right to terminate this
Agreement provided for in this Agreement.
Section 8.2. Termination. This Agreement may be terminated before the
Closing Date:
(a) by mutual written consent of all of the parties hereto;
(b) by the Investors in the event of a material breach by the
Marlton Parties of any provision of this Agreement, it being understood that
26
with respect to breaches that are readily quantifiable in dollars, those
breaches shall be material only if they equal $200,000 or more in the aggregate;
(c) by the Marlton Parties in the event of a material breach
by either of the Investors of any provision of this Agreement, it being
understood that with respect to breaches that are readily quantifiable in
dollars, those breaches shall be material only if they equal $200,000 or more in
the aggregate;
(d) by the Investors if any of the conditions set forth in
Section 7.1 or 7.3 shall not have been satisfied or waived, it being understood
that the requirement of approval by the Company's Stockholders of the Subject
Transactions cannot be waived;
(e) by the Marlton Parties if any of the conditions set forth
in Section 7.1 or 7.2 shall not have been satisfied or waived, it being
understood that the requirement of approval by the Company's Stockholders of the
Subject Transactions cannot be waived;
(f) By the Investors,
(1) if the Independent Committee does not recommend to the
Company's stockholders the approval of the Subject
Transactions or withdraws, modifies or changes its
recommendation of the Subject Transactions in a manner
adverse to the Investors or shall have resolved to do so,
(2) if the Board of Directors of either Marlton Party
shall have recommended to its stockholders a Competing
Transaction or shall have resolved to do so,
(3) if a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of either Marlton
Party is commenced, and the Board of Directors of such
Marlton Party fails to recommend within ten Business Days
against acceptance of such tender offer or exchange offer
by its stockholders (for purposes of this Agreement,
taking no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders shall
be considered to be a failure to recommend against
acceptance),
(4) if the Marlton Parties cannot obtain the Fairness
Opinion within 20 Business Days of the date hereof; or
(5) if the Subject Transactions shall fail to receive the
requisite vote for adoption at the Company's Stockholder
Meeting;
(g) by the Marlton Parties, if
(A) the Independent Committee shall have withdrawn,
modified or changed its recommendation of the adoption of the transactions
contemplated by this Agreement in a manner adverse to the Investors following
27
such Committee`s receipt of advice of independent legal counsel (who may be such
Marlton Party's regularly engaged independent legal counsel) that failure to
terminate this Agreement would cause the Independent Committee or the Board of
Directors of such Marlton Party to breach its fiduciary duties to such Marlton
Party or its stockholders under applicable Laws and (B) any Person (other than
the Investors) shall have made a public announcement or communicated to such
Marlton Party with respect to a Superior Proposal with respect to such Marlton
Party and the Board of Directors of such Marlton Party fails to recommend within
ten Business Days against acceptance of such Superior Proposal;
(h) if the Closing has not been consummated before December
31, 2001, by (i) the Investors so long as no willful breach of any
representation, warranty or covenant by the Investors is a substantial cause of
the failure of the Closing to be consummated by such date and (ii) the Marlton
Parties so long as no willful breach of any representation, warranty or covenant
by the Marlton Parties is a substantial cause of the failure of the Closing to
be consummated by such date; or
(i) by the Marlton Parties in the event that the Marlton
Parties can demonstrate in writing that if the Closing were to occur that it was
certain the Investors would be entitled at such time to indemnification for
specified Losses of more than $400,000, unless the Investors agree to waive such
specified Losses (but no other Losses) to the extent they exceed $400,000.
Section 8.3. Termination Fee and Expenses. (a) Subject to Section 8.4
hereof, the Marlton Parties agree jointly and severally to pay to the Investors
(to be shared by the Investors in proportion to the amount of the Purchase Price
each Investor is required to pay pursuant to Section 1(a) hereof) a termination
fee (the "Termination Fee") in cash equal to the lesser of (i) the highest
amount then allowed under the Laws of the State of Pennsylvania and (ii)
$250,000 and shall reimburse the Investors for all of their Expenses up to an
aggregate maximum of $75,000 in the following circumstances: (i) If the Marlton
Parties terminate this Agreement pursuant to Section 8.2 (g) hereof, or (ii) if
the Investors terminate this Agreement pursuant to Section 8.2 (f) (1), (2) or
(3) or (iii) if (A) the Subject Transactions shall fail to receive the required
vote for adoption at the Company's Stockholders Meeting, (B) the Marlton Parties
shall have held discussions regarding the details of a Competing Transaction
with a third party (the "Third Party") prior to the Company's Stockholders'
Meeting, (C) the Board of Directors of either Marlton Party shall approve a
Competing Transaction with such Third Party or an affiliate thereof within six
months of the Company's Stockholders Meeting and (D) such Competing Transaction
is consummated (provided, however, if the Investors have previously been paid a
Termination Fee or been reimbursed for their Expenses such prior payments or
reimbursements shall be deducted from the amounts payable pursuant to this
sentence).
(b) Subject to Section 8.4 hereof, the Marlton Parties agree
jointly and severally to pay to the Investors (to be shared as provided in
paragraph (a) above), a Termination Fee equal to the lesser of (i) the highest
amount then allowed under the laws of the State of New Jersey and (ii) $100,000
in cash and shall reimburse the Investors for all of their Expenses up to an
aggregate maximum of $75,000 if the Investors terminate this Agreement pursuant
to Section 8.2(b), or 8.2(d) (other than because a condition set forth in
Section 7.1 or 7.3(f) has not been satisfied or waived or the failure to deliver
28
the opinion required by Section 6.1(d)) or if the Marlton Parties terminate this
Agreement pursuant to Section 8.2(i). Subject to Section 8.4 hereof, the Marlton
Parties agree jointly and severally to reimburse the Investors for all of their
Expenses up to an aggregate maximum of $75,000 if the Investors terminate this
Agreement pursuant to Sections 8.2(f)(4) or 8.2(f)(5) or if the Agreement is
terminated pursuant to Section 8.2(d) or 8.2(e) because a condition set forth in
Section 7.1 or 7.3(f) has not been satisfied or waived or the failure to deliver
the opinion required by Section 6.1(d).
(c) Subject to Section 8.4 hereof, the Investors agree jointly
and severally to pay the Company a Termination Fee equal to the lesser of (i)
the highest amount then allowed under the laws of the State of New Jersey and
(ii) $100,000 in cash and shall reimburse the Investors for all of their
Expenses up to an aggregate maximum of $75,000 if the Marlton Parties terminate
this Agreement pursuant to Section 8.2(c) or 8.2(e) (other than because a
condition set forth in Section 7.1 has not been satisfied or waived).
(d) All payments required to be made pursuant to Section 8.3
above shall be made to the party entitled to receive the same not later than
thirty Business Days after delivery to the party obligated to make such payment
of notice of demand for payment
(e) In the event that a party hereto shall fail to pay any
Expense or any Termination Fee when due, the amount of any such Expense or
Termination Fee shall be increased to include the costs and expenses actually
incurred by the party entitled to receive payment (including, without
limitation, reasonable fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.3, together with interest on
such unpaid Expenses and Termination Fee, commencing on the date that such
Expenses and Termination Fee became due, at a rate equal to (i) the rate of
interest publicly announced by Citibank, NA, from time to time, in the City of
New York, as such bank's Prime Rate plus (ii) 2%.
Section 8.4. Limitation on Section 8.3 Hereof. Notwithstanding anything
to the contrary herein, no party to this Agreement shall be entitled to receive
any portion of a Termination Fee or to be reimbursed for its Expenses to the
extent such party has materially breached its obligations under this Agreement.
In the event that one of the parties hereto is required to pay the Termination
Fee and reimburse Expenses and only one of the other parties is entitled to
receive such Termination Fee and to be reimbursed for such Expenses, then the
full Termination Fee shall be paid to the party entitled to receive payment and
only the Expenses of the party entitled to receive payment shall be reimbursed.
Notwithstanding anything to the contrary herein, no party to this Agreement
shall be required to pay more than one Termination Fee.
Section 8.5. Difficulty of Calculating Actual Damages. The parties
hereby acknowledge and agree that it would not be possible to calculate the
magnitude of the Investors' damages in the event this Agreement were terminated
in any of the circumstances referred to Section 8.3 hereof. Accordingly, in the
event this Agreement were terminated in any of the circumstances referred to in
such Section 8.3, they agree that the applicable Termination Fee and Expenses
represent (a) a fair and reasonable measure of the value of the time expended by
the management of the Marlton Parties or the Investors and the opportunities
that the Marlton Parties or the Investors, as applicable, have foregone, the
29
payment of which, in the case of the Marlton Parties, is consistent with any
fiduciary duties owed to the shareholders of the party making such payment and
(b) the Marlton Parties and the Investors' sole and exclusive remedy arising
from such termination of this Agreement and the circumstances giving rise to
such termination.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Arm's Length Negotiations. Each party expressly represents
and warrants to the other parties that: (a) before executing this Agreement, the
party has fully informed itself of the terms, contents, conditions and effects
of this Agreement; (b) the party has relied solely and completely upon its own
judgment in executing this Agreement; (c) the party has had the opportunity to
seek and has obtained the advice of counsel before executing this Agreement; (d)
the party has acted voluntarily and of its own free will in executing this
Agreement; (e) the party is not acting under duress, whether economic or
physical, in executing this Agreement; and (f) this Agreement is the result of
arm's length negotiations conducted by and among the parties and their
respective counsel.
Section 9.2 Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties and delivered to the parties hereto.
Section 9.3 Expenses. Each party shall pay its own fees and expenses,
including the costs of any attorneys or consultants engaged by it, incurred in
connection with the negotiation, execution and delivery of this Agreement or any
transaction contemplated by any Transaction Document.
Section 9.4 Assignment, Binding Effect. This Agreement shall bind and
inure to the benefit of the parties hereto, and their respective heirs,
executors, administrators, successors and permitted assigns. No party may assign
its rights or delegate its obligations under this Agreement without the prior
written consent of each of the other parties hereto.
Section 9.5 Section Headings. The Section headings herein have been
inserted for convenience of reference only, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 9.6 Unenforceability; Severability. If any provision of this
Agreement shall for any reason be held unenforceable, such provision to the
extent enforceable shall be severed from this Agreement unless, as a result of
such severance, the Agreement fails to reflect the basic intent of the parties.
If the Agreement continues to reflect the basic intent of the parties, then the
invalidity of such specific provision shall not affect the enforceability of any
other provision herein, and the remaining provisions shall remain in full force
and effect. If any covenant or restriction contained herein is determined by a
30
court of law to be overly broad, thereby making the covenant unenforceable, the
parties hereto agree, and it is their desire, that such court shall substitute a
judicially enforceable limitation in its place, and that as so modified the
covenant shall be binding upon the parties as if originally set forth herein.
Section 9.7 Recitals and Disclosure Schedules. The Recitals set forth
above and the Disclosure Schedules are hereby incorporated in and made a part of
this Agreement by this reference.
Section 9.8 Waivers; Amendment. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are subject to Article V hereof; provided, however, that in
addition to the rights and remedies provided by such Article V, the parties
shall be entitled to equitable relief except for any claim or cause of action
(including, without limitation, any tort claim) arising from or relating to this
Agreement against any Affiliate (other than any signatory hereto as to its
obligations hereunder) of any other party hereto, including, without limitation,
any claim or cause of action based on any theory asserting shareholder liability
of an entity or the "piercing of the corporate veil" of an entity.
Section 9.9 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to the Marlton Parties:
Marlton Technologies, Inc.
2828 Charter Road
Philadelphia, PA 19154
Attention: Chairman of the Board
with a copy to:
Robert Young, Jr., Esq.
McCausland, Keen & Buckman
Radnor Court, Suite 160
259 North Radnor-Chester Road
Radnor, Pennsylvania 19087-5240
31
If to the Investors:
Scott Tarte
833 Muirfield Rd.
Bryn Mawr, PA 19010
Jeffrey Harrow
670 Dodds Lane
Gladwyne, PA 19035
With a copy to:
Avron I. Brog, Esq.
Robinson Brog Leinwand
Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
or to such other address as any party hereto to whom notice is to be given may
have furnished to the other parties hereto in writing in accordance herewith.
Any such notice or communication shall be deemed to have been delivered and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of nationally-recognized overnight courier, on the next
business day after the date when sent, (iii) in the case of telecopy
transmission when received, and (iv) in the case of mailing, on the third
business day following that on which the piece of mail containing such
communication is posted.
Section 9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (without regard to any conflict
of laws principles) of the Commonwealth of Pennsylvania.
Section 9.11 Arbitration. Any dispute arising out of or relating to
this Agreement (including every controversy or claim arising out of or relating
to indemnification for Losses pursuant to Article V of this Agreement which the
indemnifying party and the indemnitee have not resolved) or the breach,
termination or validity hereof shall be finally settled by binding arbitration
conducted expeditiously in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") as in effect from time to time, as
modified by this Agreement, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The place
of arbitration shall be in Philadelphia, Pennsylvania. Notwithstanding anything
to the contrary contained herein, the provisions of this Section 9.11 shall not
apply with regard to any equitable remedies to which any party may be entitled
hereunder. The Investors shall select one arbitrator, the Marlton Parties shall
select one arbitrator and the two such selected arbitrators shall select a third
arbitrator (who shall not be appointed by the parties) selected from the AAA.
Section 9.12 Definitions. As used in this Agreement, the following
terms have the meanings set forth below:
32
"Business Day". Any day other than a Saturday, Sunday or legal
holiday on which banks are closed for business in the
Commonwealth of Pennsylvania.
"Expenses". All out-of-pocket expenses (including, without
limitation, all reasonable fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) incurred by a party on its
behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this
Agreement (and the related documents) and all other matters
related to the closing of the transactions contemplated by the
Transaction Documents.
"Exchange Act". The Securities Exchange Act of 1934, as
amended.
"Governmental Entities". Any government or any court, arbitral
tribunal, administrative agency or commission or other
governmental or regulatory authority or agency, Federal,
state, local, transnational or foreign.
"Law". All judgments, decrees, injunctions, orders, writs,
rulings, laws, ordinances, statutes, rules, regulations, codes
and other requirements of all Federal, state and local
governmental, administrative and judicial bodies and
authorities.
"Marlton Parties' Knowledge". The Marlton Parties' Knowledge
or phrases of similar import shall refer to the actual
knowledge of one of the following officers of the Company:
Robert Ginsburg, Alan Goldberg and Stephen Rolf.
"Material Adverse Effect." Material Adverse Effect and phrases
of similar impact shall refer to a material adverse effect on
the business, assets, results of operations or financial
condition of the Company and its subsidiaries taken as a whole
or the Surviving Corporation and its subsidiaries taken as a
whole, as the context requires; Whenever a representation,
warranty, covenant, agreement or condition involves a
determination as to whether something has had or caused a
Material Adverse Effect, the market price of the Company
Common Stock and/or the Common Stock on the American Stock
Exchange or other exchange on which the Company Common Stock
and/or the Common Stock may be listed shall not constitute
evidence that a Material Adverse Effect has or has not
occurred. For purposes of Sections 6.1, 6.2, 7.2 and 7.3 the
Parties agree that there is no intention of imposing one
materiality standard or requirement (no matter how
characterized) upon a second materiality standard or
requirement anywhere in this Agreement and that if in any
place a materiality standard or requirement is imposed upon
another materiality standard or requirement, such additional
standard or requirement will be ignored.
"Person". An individual, partnership, joint venture,
corporation, trust, unincorporated organization, limited
liability company, group and government or a department or
agency thereof,
"SEC". The United States Securities and Exchange Commission.
33
"Securities Act". The Securities Act of 1933, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
MARLTON TECHNOLOGIES, INC
By: /s/ Seymour Hernes
------------------------------------
Name: Seymour Hernes
Title: Vice Chairman of the Board
MARLTON TECHNOLOGIES (PA), INC
By: /s/ Seymour Hernes
------------------------------------
Name: Seymour Hernes
Title: Director
SCOTT TARTE
By: /s/ Scott Tarte
------------------------------------
JEFFREY HARROW
By: /s/ Jeffrey Harrow
------------------------------------
34
ANNEX III
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (the "Agreement") dated as of August 23,
2001, is made and entered into by and among Marlton Technologies, Inc., a New
Jersey corporation (the "Company"), and Marlton Technologies, Inc., a newly
formed Pennsylvania corporation (the "Surviving Corporation" and together with
the Company, the "Marlton Parties"), and Robert Ginsburg ("Ginsburg") and Alan
Goldberg ("Goldberg") (collectively, the "Investors").
RECITALS
The Company proposes to reincorporate in Pennsylvania as a Pennsylvania
corporation by merging with and into the Surviving Corporation, as a result of
which each outstanding share of the Company's common stock, par value $0.10 per
share (the "Company Common Stock") will be converted into one share of the
Surviving Corporation's common stock, without par value (the "Common Stock")
(the "Reincorporation").
The Marlton Parties and Scott Tarte and Jeffrey Harrow (the
"Purchasers") have entered into a subscription agreement (the "Other Agreement")
regarding the purchase of shares (the "Shares") of the Marlton Parties' Common
Stock and warrants (the "Warrants") in the form of Exhibit A thereto to purchase
shares (the "Warrant Shares") of the Marlton Parties' Common Stock.
Now, therefore, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
ISSUANCE OF SHARES AND WARRANTS
Upon the terms and subject to the conditions set forth in this
Agreement, simultaneously with the closing of the Other Agreement (the "Closing
Date" or the "Closing"), the Marlton Parties will issue, transfer and convey,
and (i) Ginsburg will purchase 1,000,000 Shares and 1,000,000 Warrants in
exchange for $500,000; and (ii) Goldberg will purchase 300,000 Shares and
300,000 Warrants in exchange for $150,000.
ARTICLE II
CLOSING DOCUMENTS; CLOSING CONDITIONS
Section 2.1 Documents to Be Delivered by the Marlton Parties. The
Marlton Parties agree to deliver to the Investors on the Closing Date (i) the
Registration Rights Agreement (as defined in the Other Agreement) executed by
the Marlton Parties, (ii) the Warrants executed by the Marlton Parties, (iii)
certificates representing the Shares, and (iv) such other documents and showings
as shall reasonably be required by the Investors.
Section 2.2 Documents to Be Delivered by the Investors. The Investors
agree to deliver to the Marlton Parties on the Closing Date (i) the Purchase
Price in cash, (ii) the Registration Rights Agreement executed by the Investors,
1
and (iii) such other documents and showings as shall reasonably be required by
the Marlton Parties and their counsel.
Section 2.3 Conditions to the Obligations of All Parties. The
respective obligations of each party to effect this Agreement and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Closing of (i) the satisfaction of all of the covenants, additional
agreements and conditions to the consummation of the transactions contemplated
by the Other Agreement, and (ii) the consummation of the transactions
contemplated by the Other Agreement, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable law.
Section 2.4 Termination. This Agreement may be terminated as to either
or both Investors before the Closing Date (i) by mutual written consent of such
Investor and the Company, or (ii) as provided in Section 8.2 of the Other
Agreement, which is hereby incorporated by reference into this Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENT OF THE INVESTORS
Each of the Investors hereby severally represents and warrants to, and
agrees with, the Marlton Parties as set forth in Article III of the Other
Agreement, which is hereby incorporated by reference into this Agreement.
ARTICLE IV
GENERAL PROVISIONS
Article IX and [Article __ re if Reincorporaton not approved] from the
Other Agreement are hereby incorporated by reference into this Agreement,
provided that the address for each of the Investors for notices shall be 2828
Charter Road, Philadelphia, PA 19154, without copies sent to any other party.
MARLTON TECHNOLOGIES, INC MARLTON TECHNOLOGIES, INC
By: /s/ Seymour Hernes By: /s/ Seymour Hernes
---------------------- -------------------------
Name: Seymour Hernes Name: Seymour Hernes
Title Vice Chairman Title: Director
ROBERT GINSBURG ALAN GOLDBERG
By: /s/ Robert Ginsburg By: /s/ Alan Goldberg
---------------------- -------------------------
2
ANNEX IV
Warrant to Purchase
WA-** ***
Shares of Common Stock
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ( THE "ACT"),
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 P.M. New York City time on the tenth anniversary of the date
hereof.
SERIES A WARRANT TO PURCHASE COMMON STOCK
OF
MARLTON TECHNOLOGIES (PA), INC.(1)
This is to certify that, FOR VALUE RECEIVED, [ ] or assigns, is entitled to
purchase, subject to the provisions of this Series A Warrant to Purchase Common
Stock (the "Warrant" or "Series A Warrant"), from [MARLTON TECHNOLOGIES (PA),
INC.], a [Pennsylvania] corporation (the "Company"), at an exercise price of
Fifty Cents ($0.50) per share, [ ] ([ ]) shares of Common Stock, without par
value, of the Company (the "Common Stock") at any time during the period (the
"Exercise Period") commencing as of the date hereof, and ending at 5:00 p.m. New
York City time, on the tenth anniversary of the date hereof. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock also may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price for the purchase of a share of
Common Stock pursuant to this Warrant in effect at any time and as adjusted from
time to time is hereby referred to as the "Exercise Price". This Warrant is one
of the Series A Warrants issued pursuant to the subscription agreement (the
"Subscription Agreement") dated as of August [ ], 2001 to which the Company and
the above-named holder are parties and a second subscription agreement executed
concurrently with the Subscription Agreement (the "Second Subscription
Agreement" and together with the Subscription Agreement, the "Subscription
Agreements" pursuant to which an aggregate of up to 5,300,000 shares (subject to
adjustment as provided herein) of Common Stock may be issued. References to all
of the Warrants shall include all outstanding Series A Warrants to Purchase
Common Stock of the Company originally issued pursuant to the Subscription
Agreements, including Warrants held by transferees.
-------------------
(1) If Reincorporation does not occur, Warrants will be issued by the New
Jersey Company and the Warrant will be revised accordingly.
1
1. EXERCISE OF WARRANT. Except as otherwise provided for herein, this
Warrant may be exercised in whole at any time, or in part from time to time,
during the Exercise Period by presentation and surrender hereof to the Company
at its principal office, or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto as Exhibit A duly executed and by paying
in full, in lawful money of the United States, (a) in cash, certified check or
bank draft payable to the order of the Company (b) with shares of Common Stock
that have been held by the Holder for at least six months (or such other shares
as the Company determines will not cause the Company to realize a financial
accounting charge), (c) as provided in Section 9 of this Warrant or (d) in such
other manner as may be determined by the Board in its absolute discretion, the
Exercise Price for each full share of Common Stock as to which the Warrant is
exercised and any and all applicable taxes due in connection with the exercise
of the Warrant, the exchange of the Warrant for the Common Stock, and the
issuance of the Common Stock. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder hereof to purchase the
balance of the shares purchasable hereunder. Upon receipt by the Company of this
Warrant and the Exercise Price therefor at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, the Registered
Holder (as defined) shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise provided, that if the date of such
surrender and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the Registered Holder of such
shares at the close of business on the next succeeding date on which the stock
transfer books are open.
2. VALID ISSUANCE. All shares of Common Stock issued upon the proper
exercise of this Warrant in conformity with the terms hereof shall be validly
issued, fully paid and non-assessable.
3. RESERVATION OF COMMON STOCK; LISTING OF SHARES. The Company hereby
agrees that: (a) at all times there shall be reserved for issuance and/or
delivery upon exercise of this Warrant such number of shares of its Common Stock
as shall be required for issuance and delivery upon exercise of this Warrant;
and (b) in the event the shares of the Company's Common Stock are included on
American Stock Exchange or another national securities exchange, it shall cause
the Warrant Shares to be so listed.
4. FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractional shares
upon exercise of this Warrant. If upon exercise of this Warrant the Company
would be required to issue a fractional number of shares, the Company shall, in
lieu thereof, pay to the Registered Holder an amount in cash equal to such
fraction multiplied by the current Market Price Per Share (as defined), as of
the last business day prior to the date of exercise of this Warrant.
2
(b) As used herein, the term "Market Price Per Share" on any date
shall mean the average closing price per share of the Common Stock for the ten
(10) trading days immediately preceding such date. The closing price for each
such day shall be the last sale price or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, in either case on the
principal securities exchange (including any automated system of quotation) (an
"Exchange") on which the Common Stock is listed or admitted for trading, or, if
not so listed on an Exchange, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose. If such bid and
asked prices are not available, then "Market Price Per Share" shall be the fair
market value of the Company's Common Stock as determined in good faith by the
Board of Directors of the Company.
5. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Registered Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different denominations entitling
the Registered Holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Subject to the provisions of
Section 10 of this Warrant, upon surrender of this Warrant to the Company or at
the office of its stock transfer agent, if any, with the Assignment Form annexed
hereto as Exhibit A duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant in the name
of the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the office of
the Company or at the office of its stock transfer agent, if any, together with
a written notice specifying the names and denominations in which new Warrants
are to be issued and signed by the Registered Holder hereof. The term "Warrant"
as used herein includes any Warrants into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date.
6. RIGHTS OF THE HOLDER. The holder of this Warrant shall not, by
virtue of this Warrant, be entitled to any rights of a stockholder in the
Company, either at law or equity, and the rights of the holder of this Warrant
are limited to those expressed in this Warrant and are not enforceable against
the Company except to the extent set forth herein.
7. ANTIDILUTION ADJUSTMENT OF NUMBER OF WARRANT SHARES AND EXERCISE
PRICE; OTHER RECLASSIFICATIONS, REORGANIZATIONS OR MERGERS.
(a) In case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
split, subdivide or reclassify its outstanding Common Stock into a greater
number of shares or (iii) combine or reclassify its outstanding Common Stock
into a smaller number of shares, then the number of Warrant Shares issuable upon
exercise of this Warrant, and the Exercise Price per share in effect at the time
of the record date for such dividend or distribution or at the effective date of
such split, subdivision, combination or reclassification, shall be
proportionately adjusted so that if this Warrant is exercised after such date,
the Registered Holder shall be entitled to receive for the same aggregate
purchase price, the aggregate number and kind of shares which, if this Warrant
had been exercised immediately prior to such time, such Holder would have owned
after giving effect to such dividend or distribution, split, subdivision,
combination or reclassification. Such adjustments shall be made successively
whenever any event listed in this Section 7 shall occur. All price calculations
under this Section 7 shall be made to the nearest whole cent and share
adjustments to the nearest whole share.
3
(b) If after the date hereof any capital reorganization or
reclassification of the Common Stock of the Company, or consolidation or merger
of the Company with or into another corporation, or the sale of all or
substantially all of its assets to another corporation or other similar event
(collectively referred to as a "Transaction") shall be effected, then, as a
condition of such Transaction, lawful and fair provision shall be made whereby
the Registered Holder of this Warrant shall thereafter have the right by
exercising this Warrant, to purchase (in lieu of purchasing the shares of Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of this Warrant), the kind and amount of shares of stock, securities,
or assets receivable upon such Transaction by a holder of the number of shares
of Common Stock which might have been purchased upon exercise of this Warrant
immediately prior to such Transaction. In such event, appropriate provision
shall be made with respect to the rights and interests of the Registered Holder
of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, to any share of stock, securities, or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such Transaction unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such Transaction, or the
corporation purchasing such assets, shall assume the obligations to deliver to
the Registered Holder of this Warrant such shares of stock, securities, or
assets which, in accordance with the foregoing provisions, such holder may be
entitled to purchase.
8. NOTICES OF CHANGE IN WARRANT. Upon every adjustment of the Exercise
Price or the number of shares issuable on exercise of this Warrant, the Company
shall give written notice thereof to the Registered Holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. Upon
the occurrence of any event specified in Section 7, then, in any such event, the
Company shall give written notice to the Registered Holder of this Warrant of
the record date for such dividend, distribution, split, reclassification or
recombination, or the effective date of Transaction. Such notice shall also
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution, split, reclassification or
recombination, or shall be entitled to exchange their Common Stock for stock,
securities, or other assets deliverable upon a Transaction. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of such
event.
4
9. CONVERSION.
(a) In lieu of exercise of any portion of the Warrant as provided
herein, and the payment of the exercise price therefor in the manner
contemplated by Sections 1(a), 1(b), and 1(d) hereof, the Warrant
(or any portion thereof) may, at the election of the Holder with the
Conversion Form annexed hereto as Exhibit B duly executed, be
converted into the nearest whole number of Warrant Shares determined
pursuant to the following formula:
Number of Warrant Shares = NWS multiplied by (MVPS minus EP)
---------------
( MVPS )
where:
NWS is the number of Warrants to be exercised;
MVPS is the Market Value Per Share of Common Stock on the date
of exercise, which shall be determined in the manner set forth
in Section 4(b); and
EP is the Exercise Price in effect on the business day next
preceding the date of exercise.
(b) Notwithstanding anything to the contrary herein, the conversion
privilege afforded under this Section 9 may only be used if, at the
date of exercise, the Market Value Per Share of Common Stock is
greater than the Exercise Price then in effect.
10. COMPLIANCE WITH THE SECURITIES ACT OF 1933.
(a) This Warrant or the Warrant Shares or any other security issued
or issuable upon exercise of this Warrant may not be sold or otherwise disposed
of except as follows:
(i) the holder of the Warrant or the Warrant Shares has
delivered to the Company an opinion of counsel, which opinion is reasonably
acceptable to the Company, that the transfer is exempt from the registration
requirement of the Act and the proposed transferee has delivered to the Company
an agreement to comply with the obligations of the holder of this Warrant which
agreement shall be reasonably satisfactory in form and substance to the Company;
or
5
(ii) to any person upon delivery of a prospectus then meeting
the requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
(b) Notwithstanding anything to the contrary herein, the Company
shall not be obligated to deliver any securities issuable on exercise of this
Warrant unless the issuance of such securities has been registered under the Act
or, in the opinion of counsel to the Company, the issuance is exempt from the
registration requirements of the Act and applicable state securities laws. This
Warrant may not be exercised by, nor may any securities be issued to, any
Registered Holder in any state in which such exercise would be unlawful.
11. MISCELLANEOUS.
(a) All communications provided for herein shall be sent, except as
may be otherwise specifically provided, by registered or certified mail: if to
the Registered Holder of this Warrant, to the address shown on the books of the
Company; and if to the Company, to Marlton Technologies, Inc., 2828 Charter
Road, Philadelphia, PA 19154, Attention: President, or to such other address as
the Company may advise the Registered Holder of this Warrant in writing. Notices
shall be deemed given when mailed.
(b) The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of [Pennsylvania],
without regard to such state's choice of law rules.
(c) The Company shall maintain books ("Warrant Register") for the
registration of original issuance and the registration of transfer of the Series
A Warrants. Upon the initial issuance of the Warrants, the Company shall issue
and register the Warrants in the names of the holders thereof.
(d) Prior to due presentment for registration of transfer of this
Warrant, the Company may deem and treat the person in whose name this Warrant
shall be registered upon the Warrant Register ("Registered Holder"), as the
absolute owner of such Warrant and of each Warrant represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
certificate made by anyone other than the Company, for the purpose of any
exercise thereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary).
Dated: [ ]
MARLTON TECHNOLOGIES, INC.
By:____________________________
[Robert Ginsburg, President]
6
Exhibit A
PURCHASE FORM
Dated_______ , 20__
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ____________ shares of Common Stock and
hereby makes payment of _________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name____________________________________________
(Please typewrite or print in block letters)
Signature_______________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells, assigns and transfer unto
Name____________________________________________
(Please typewrite or print in block letters)
Address_________________________________________
Social Security or Employer Identification No.__________ the right to purchase
Common Stock represented by this Warrant to the extent of _____shares as to
which such right is exercisable (and the concomitant conversion rights pursuant
to Section 9 with respect to such portion of the Warrants being transferred
hereby) and does hereby irrevocably constitute and appoint ________________
Attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Dated:___________, 20__
Signature_________________________________
Signature Guaranteed
7
Exhibit B
CONVERSION FORM
Dated_______ , 20__
The undersigned hereby irrevocably elects to convert the within Warrant
to the extent of converting Warrants to purchase ___________________ shares of
Common Stock
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________________
(Please typewrite or print in block letters)
Signature____________________________________________
8
ANNEX V
EMPLOYMENT AGREEMENT(1)
This Agreement is made and entered into by and between MARLTON
TECHNOLOGIES, INC., a [Pennsylvania] corporation(the "Company"), and JEFFREY
HARROW (the "Employee") as of the [ ] day of [ ], 2001 (the "Effective Date").
WITNESSETH:
WHEREAS, the Company and the Employee desire to enter into this
Agreement to set forth the terms and conditions of the Employee's employment by
the Company, and the obligations of the parties upon termination of such
employment,
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, it is hereby agreed by and between the parties
as follows:
1. Effective Date. This Agreement shall be effective on and as of the
Effective Date.
2. Employment Period.
(a) The Company shall employ the Employee and the Employee shall be
employed by the Company as the Chairman of the Board, of the Company for the
period commencing on the Effective Date and ending on December 31, 2002 (the
"Initial Term"), plus any renewal terms (the "Additional Terms") pursuant to
Paragraph 3 below (collectively the Initial Term and the Additional Terms are
referred to as the "Employment Period").
(b) During the Employment Period, the Company and its Board of
Directors agree to use their best efforts to cause Employee to be elected and
re-elected to the Company's Board of Directors.
3. Renewals. Unless sooner terminated in accordance with Paragraph 7,
after the Initial Term the Employee shall continue to be employed by the Company
for successive one year terms unless and until such time as either the Company
or the Employee gives the other party written notice at least 90 days' prior to
the expiration of the Initial Term or any Term of an intention to terminate this
Agreement effective on the last day of such Initial Term or Additional Term.
4. Performance of Duties. During his employment by the Company, the
Employee shall devote his best efforts and substantially all of his business
time to the business affairs of the Company and shall faithfully and efficiently
perform such duties, consistent with the stature and responsibility of his
position, as may be assigned to him from time to time by the Board of Directors.
The Employee shall occupy offices at 2828 Charter Road, Philadelphia, PA 19154
and shall not be relocated without his consent, unless the offices of the
Company are relocated.
-------------------
(1) The New Jersey corporation will replace the Pennsylvania corporation as a
party, references to the reincorporation will be removed, and other
appropriate changes will be made if the reincorporation does not occur.
5. Compensation.
(a) During his employment by the Company, the Employee shall receive
(i) an annual base, salary of $218,445.40, payable in accordance with Company's
normal payroll practices, such salary to be reviewed annually by the Company's
Board of Directors to consider future adjustments and (ii) an annual bonus
determined and payable in accordance with Schedule A attached hereto (provided
that no bonus will be payable with respect to the year ending December 31, 2001.
The base salary and bonus provided to the Employee pursuant to this Section
5(a), including Schedule A, shall be no less than the base salary and bonus
provided to Robert B. Ginsburg (other than the 2001 bonus) or Scott Tarte
pursuant to their employment agreements dated the date hereof with the Company.
(b) The Employee shall be entitled to participate in any health
benefit plan, retirement, supplemental income or benefit plans which the Company
in its sole discretion sponsors for its employees generally at the time the
Employee is entitled to participate therein and shall be entitled to receive
reimbursement for all reasonable documented business expenses which the Employee
incurs in connection with the performance of his duties. The Company shall
furnish appropriate office facilities for Employee's Company activities. The
Company shall provide Employee with such life insurance as is obtainable for an
annual Premium of no more than $6,000 and disability insurance as provided to
other senior level executives of the Company.
(c) Employee shall be entitled to 4 weeks per year of compensated
vacation time, in addition to Company recognized holidays.
6. Employee Agreements. The Employee agrees:
(a) Except as otherwise required in the performance of his duties, not
to remove from the premises of the Company at any time either during or after
the term of his employment, any originals or copies of documents, reports,
drawings, lists, notebooks, test data, devices and materials and the like
pertaining to the business of the Company; and
(b) Upon termination of his employment, immediately to deliver to the
Company any and all originals or copies of documents, reports, drawings, lists,
notebooks, test data, devices and materials and the like used by him, in his
possession or under his control.
7. Termination Payments.
(a) Voluntary Termination and Termination for Cause. In the event the
Employee voluntarily terminates his employment or the Company terminates the
Employee's employment for Cause by written notice specifying the effective date
of termination, the Employee's compensation and benefits hereunder shall cease
as of the effective date of termination, to the extent permitted by law.
The term "Cause" means the Employee's (i) gross negligence, (ii)
willful misconduct, (iii) conviction of a felony, (iv) failure to devote
substantially all of his business time to the business of the Company, or (v)
repeated failure to perform those duties consistent with his position assigned
to him by the Board of Directors of the Company, which in the case of
subparagraphs (iv) or (v) has not been cured by the Employee within a reasonable
time after receipt of written notice from the Company.
-2-
(b) Termination by Death. If the Employee dies, his compensation
hereunder shall accrue up to the date of his death, with any such accrued but
unpaid amounts to be paid to his spouse or survivors in accordance with the
terms and conditions of Paragraph 5.
(c) Termination by Incapacity. If the Employee is incapacitated by
accident, sickness or otherwise so as to render him, for any period totaling 180
or more days during any consecutive twelve month period, or in the reasonable
opinion of the Company, is mentally or physically incapable of performing the
services required of him under this Agreement, the Company may terminate his
employment immediately following such 180 day period by giving him written
notice specifying the effective date of termination. Prior to such termination
under this subparagraph 7 (c), the Employee shall continue to receive his
compensation under subparagraph 5 (a), provided such compensation shall be
subject to reduction by any disability insurance payments received by the
Employee for which the Company makes premium payments.
(d) Obligations upon Termination. (i) If terminated as provided in
subparagraph 7(a), (b) or (c), Employee's base salary pursuant to subparagraph
5(a) shall accrue up to the effective date of termination. Accrued base salary
shall be payable in accordance with the Company's normal payroll practices.
Bonus, if any, shall be calculated based on the actual full annual amounts
multiplied by a fraction equal to the number of days in the calendar year of
termination preceding the effective date of termination, divided by 365, and
shall be paid in accordance with the terms of Paragraph 5.
(ii) If Employee is terminated other than pursuant to subparagraphs
7(a), (b) or (c), all subparagraph 5 (a) compensation payable until the end of
the Initial Term or Additional Term then in effect shall become immediately due
and payable, and Employee shall be entitled to the economic benefit of all
Company stock options as provided therein.
8. Confidentiality; Restrictive Covenants.
(a) During and after the Employment Period, the Employee will not (i)
directly or indirectly induce any other employee of the Company to enter into or
remain in the employ (whether as employee, director or consultant) of any
person, firm or corporation or have a financial interest in any business or
activity which is then or then intends to compete with the Company in the
continental United States in the business of the Company (as such term is
hereinafter defined), or (ii) divulge or appropriate to his own use or to the
use of others any information or knowledge relating to the sales prospects,
customer lists, formulae, costing, business methods, processes, techniques or
research of the Company, or any financial data relating to its sales, profits,
or costs or any of its customers or prospects, which are not known to the public
or the industry at large or shall not have been previously divulged by the
Company to such third party.
-3-
(b) The Employee further agrees that upon termination of his
employment for any reason other than termination by the Company (i) in violation
of the provisions of this Agreement or (ii) pursuant to Paragraph 3, for a
period of two years after the date of termination of employment, he will not,
directly or indirectly, enter into or remain in the employ (whether as employee,
director or consultant) of any person, firm or corporation or engage or have a
financial interest in any business or activity which is then or then intends to
compete with the Company in the continental United States for the sale of goods
similar to or competitive with those sold by the Company, (the "business of the
Company"). The term "business of the Company" shall include but not be limited
to any venture or project commenced by the Company prior to the termination of
the Employee's employment. If any court determines that the duration or
geographical limit of any restriction contained in this Paragraph is
unenforceable, it is the intention of the parties that the restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable, such amendment to apply
only with respect to the operation of this Paragraph in the jurisdiction of the
court that has made the adjudication. The Company and the Employee agree the
restrictive covenant set forth herein is necessary for the protection of the
legitimate business interests of the Company. In the event of a violation of the
Employee's covenant hereunder, the duration for which such violation is
continuing shall be excluded from the calculation of the period during which the
covenant set forth in this subparagraph 8 (b) shall apply.
(c) The Employee acknowledges that he has unique knowledge and
experience relating to the business of the Company which could be prejudicial
and harmful to the operation of the Company's business if he violated the terms
of this or any other provision of this Agreement. The Employee also acknowledges
that (i) the business of the Company is national in nature and that it is
therefore reasonable for the Employee's covenant contained in subparagraph 8 (b)
to extend nationally and (ii) he is not and will not be deprived of his ability
to earn a livelihood or otherwise be unduly burdened by the covenants set forth
in this Paragraph 8. In the event of any actual or threatened breach of any of
the covenants contained in this Agreement, the Company shall be entitled to an
injunction restraining the breach thereof and may pursue any other available
remedies for such actual or threatened breach, including the recovery of
monetary damages. If, in any judicial proceeding, a court shall refuse to
enforce any of the covenants contained in this Agreement, any such unenforceable
covenant shall be deemed amended to the extent necessary to permit its
enforcement to the extent practicable; otherwise, any such covenant shall be
deemed eliminated from this Agreement for the purposes of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced.
(d) The Employee agrees that to the extent he develops or originates
or participates in the development or origination of any patents, trademarks,
trade names, service marks, copyrights or patented devices or processes (or for
which patent applications are pending) during the Employment Period which are
used in or applicable to the business of the Company, the same shall remain the
exclusive property of the Company regardless of any termination by the Company.
(e) For purposes of this Paragraph 8, the term "Company" shall be
deemed to include any and all majority and wholly owned subsidiaries of the
Company and such subsidiaries.
9. Amendment. This Agreement may be amended by written agreement of
the parties without the consent of any other persons, and no person, other than
the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof, except as provided in Paragraphs 7(b) and
-4-
10. Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and legal representatives of the Employee and
the permitted successors and assigns of the Company.
11. Nonwaiver. The waiver by either party of a breach of this
Agreement shall not be construed as a waiver of any subsequent breach.
12. Notices. Notice shall be sufficiently given if personally
delivered or shall be deemed given (5) business days after such notice is
deposited with proper postage in the United States mail, addressed to the
respective parties as set forth below or at such other address as may hereafter
be furnished:
If to the Employee: If to the Company:
Jeffrey Harrow Marlton Technologies, Inc.
670 Dodds Lane 2828 Charter Road
Gladwyne, PA 19035 Philadelphia, PA 19154
Attention: President
13. Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party and is binding on the
parties hereto, their heirs, successors and assigns.
14. Headings. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define the scope or
intent of any provision or part hereof.
15. Governing Law. All controversies and disputes arising out of this
Agreement shall be determined pursuant to the laws of the [Commonwealth of
Pennsylvania], regardless of the laws that might be applied under the applicable
principles of conflicts of laws thereof.
-5-
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the employment of Employee by the
Company and, supersedes all prior agreements, understandings and negotiations,
both written and oral, between the parties hereto. This Agreement may be
modified only by a subsequent written document between the Employee and the
Company.
IN WITNESS WHEREOF, the Employee, and the Company have executed this
Agreement as of the day and year first written above.
MARLTON TECHNOLOGIES, INC.
By:________________________________
Robert B. Ginsburg
President
___________________________________
Jeffrey Harrow
-6-
SCHEDULE A
For 2001 Employee will receive an annual employment bonus equal to:
7% of pre-tax profit if EPS increases from prior year by 25.0%
6% of pre-tax profit if EPS increases from prior year by 20.0%
5% of pre-tax profit if EPS increases from prior year by 17.5%
4% of pre-tax profit if EPS increases from prior year by 15.0%
3% of pre-tax profit if EPS increases from prior year by 12.5%
2% of pre-tax profit if EPS increases from prior year by 10%
1% of pre-tax profit if EPS increases from prior year by 5.0%
EPS means Earnings per share. Non-recurring profits and/or expenses will not
normally be included in bonus calculations unless such items effect cash.
However, the Board may give consideration to special circumstances.
Bonuses thereafter will be pursuant to a new bonus plan for the Employee to be
determined by the Company's compensation committee.
ANNEX VI
EMPLOYMENT AGREEMENT(1)
-----------------------
This Agreement is made and entered into by and between MARLTON
TECHNOLOGIES, INC., a [Pennsylvania] corporation (the "Company"), and SCOTT
TARTE (the "Employee") as of the [ ] day of [ ], 2001 (the "Effective Date").
WITNESSETH:
WHEREAS, the Company and the Employee desire to enter into this
Agreement to set forth the terms and conditions of the Employee's employment by
the Company, and the obligations of the parties upon termination of such
employment,
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, it is hereby agreed by and between the parties
as follows:
1. Effective Date. This Agreement shall be effective on and as of
the Effective Date.
2. Employment Period.
(a) The Company shall employ the Employee and the Employee shall be
employed by the Company as its Vice Chairman of the Board and as the Chief
Executive Officer of each subsidiary of the Company for the period commencing on
the Effective Date and ending on December 31, 2002 (the "Initial Term"), plus
any renewal terms (the "Additional Terms") pursuant to Paragraph 3 below
(collectively the Initial Term and the Additional Terms are referred to as the
"Employment Period").
(b) During the Employment Period, the Company and its Board of
Directors agree to use their best efforts to cause Employee to be elected and
re-elected to the Company's Board of Directors.
3. Renewals. Unless sooner terminated in accordance with Paragraph 7,
after the Initial Term the Employee shall continue to be employed by the Company
for successive one year terms unless and until such time as either the Company
or the Employee gives the other party written notice at least 90 days' prior to
the expiration of the Initial Term or any Term of an intention to terminate this
Agreement effective on the last day of such Initial Term or Additional Term.
4. Performance of Duties. During his employment by the Company, the
Employee shall devote his best efforts and substantially all of his business
time to the business affairs of the Company and shall faithfully and efficiently
perform such duties, consistent with the stature and responsibility of his
position, as may be assigned to him from time to time by the Board of Directors.
The Employee shall occupy offices at 2828 Charter Road, Philadelphia, PA 19154
and shall not be relocated without his consent, unless the offices of the
Company are relocated.
----------------
(1) The New Jersey corporation will replace the Pennsylvania corporation as a
party, references to the reincorporation will be removed, and other appropriate
changes will be made if the reincorporation does not occur.
5. Compensation.
(a) During his employment by the Company, the Employee shall receive
an annual base, salary of $218,445.40 payable in accordance with Company's
normal payroll practices, such salary to be reviewed annually by the Company's
Board of Directors to consider future adjustments and (ii) an annual bonus
determined and payable in accordance with Schedule A attached hereto (provided
that no bonus will be payable with respect to the year ending December 31, 2001.
The base salary and bonus provided to the Employee pursuant to this Section
5(a), including Schedule A, shall be no less than the base salary and bonus
provided to Robert B. Ginsburg (other than the 2001 bonus) or Jeffrey Harrow
pursuant to their employment agreements dated the date hereof with the Company.
(b) The Employee shall be entitled to participate in any health
benefit plan, retirement, supplemental income or benefit plans which the Company
in its sole discretion sponsors for its employees generally at the time the
Employee is entitled to participate therein and shall be entitled to receive
reimbursement for all reasonable documented business expenses which the Employee
incurs in connection with the performance of his duties. The Company shall
furnish appropriate office facilities for Employee's Company activities. The
Company shall provide Employee with such life insurance as is obtainable for an
annual premium of no more than $6,000 and disability insurance as provided to
other senior level executives of the Company.
(c) Employee shall be entitled to 4 weeks per year of compensated
vacation time, in addition to Company recognized holidays.
6. Employee Agreements. The Employee agrees:
(a) Except as otherwise required in the performance of his duties, not
to remove from the premises of the Company at any time either during or after
the term of his employment, any originals or copies of documents, reports,
drawings, lists, notebooks, test data, devices and materials and the like
pertaining to the business of the Company; and
(b) Upon termination of his employment, immediately to deliver to the
Company any and all originals or copies of documents, reports, drawings, lists,
notebooks, test data, devices and materials and the like used by him, in his
possession or under his control.
7. Termination Payments.
(a) Voluntary Termination and Termination for Cause. In the event the
Employee voluntarily terminates his employment or the Company terminates the
Employee's employment for Cause by written notice specifying the effective date
of termination, the Employee's compensation and benefits hereunder shall cease
as of the effective date of termination, to the extent permitted by law.
The term "Cause" means the Employee's (i) gross negligence, (ii)
willful misconduct, (iii) conviction of a felony, (iv) failure to devote
substantially all of his business time to the business of the Company, or (v)
repeated failure to perform those duties consistent with his position assigned
to him by the Board of Directors of the Company, which in the case of
-2-
subparagraphs (iv) or (v) has not been cured by the Employee within a reasonable
time after receipt of written notice from the Company.
(b) Termination by Death. If the Employee dies, his compensation
hereunder shall accrue up to the date of his death, with any such accrued but
unpaid amounts to be paid to his spouse or survivors in accordance with the
terms and conditions of Paragraph 5.
(c) Termination by Incapacity. If the Employee is incapacitated by
accident, sickness or otherwise so as to render him, for any period totaling 180
or more days during any consecutive twelve month period, or in the reasonable
opinion of the Company, is mentally or physically incapable of performing the
services required of him under this Agreement, the Company may terminate his
employment immediately following such 180 day period by giving him written
notice specifying the effective date of termination. Prior to such termination
under this subparagraph 7 (c), the Employee shall continue to receive his
compensation under subparagraph 5 (a), provided such compensation shall be
subject to reduction by any disability insurance payments received by the
Employee for which the Company makes premium payments.
(d) Obligations upon Termination. (i) If terminated as provided in
subparagraph 7(a), (b) or (c), Employee's base salary pursuant to subparagraph
5(a) shall accrue up to the effective date of termination. Accrued base salary
shall be payable in accordance with the Company's normal payroll practices.
Bonus, if any, shall be calculated based on the actual full annual amounts
multiplied by a fraction equal to the number of days in the calendar year of
termination preceding the effective date of termination, divided by 365, and
shall be paid in accordance with the terms of Paragraph 5.
(ii) If Employee is terminated other than pursuant to subparagraphs
7(a), (b) or (c), all subparagraph 5 (a) compensation payable until the end of
the Initial Term or Additional Term then in effect shall become immediately due
and payable, and Employee shall be entitled to the economic benefit of all
Company stock options as provided therein.
8. Confidentiality; Restrictive Covenants.
(a) During and after the Employment Period, the Employee will not (i)
directly or indirectly induce any other employee of the Company to enter into or
remain in the employ (whether as employee, director or consultant) of any
person, firm or corporation or have a financial interest in any business or
activity which is then or then intends to compete with the Company in the
continental United States in the business of the Company (as such term is
hereinafter defined), or (ii) divulge or appropriate to his own use or to the
use of others any information or knowledge relating to the sales prospects,
customer lists, formulae, costing, business methods, processes, techniques or
research of the Company, or any financial data relating to its sales, profits,
or costs or any of its customers or prospects, which are not known to the public
or the industry at large or shall not have been previously divulged by the
Company to such third party.
(b) The Employee further agrees that upon termination of his
employment for any reason other than termination by the Company (i) in violation
of the provisions of this Agreement or (ii) pursuant to Paragraph 3, for a
period of two years after the date of termination of employment, he will not,
-3-
directly or indirectly, enter into or remain in the employ (whether as employee,
director or consultant) of any person, firm or corporation or engage or have a
financial interest in any business or activity which is then or then intends to
compete with the Company in the continental United States for the sale of goods
similar to or competitive with those sold by the Company, (the "business of the
Company"). The term "business of the Company" shall include but not be limited
to any venture or project commenced by the Company prior to the termination of
the Employee's employment. If any court determines that the duration or
geographical limit of any restriction contained in this Paragraph is
unenforceable, it is the intention of the parties that the restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable, such amendment to apply
only with respect to the operation of this Paragraph in the jurisdiction of the
court that has made the adjudication. The Company and the Employee agree the
restrictive covenant set forth herein is necessary for the protection of the
legitimate business interests of the Company. In the event of a violation of the
Employee's covenant hereunder, the duration for which such violation is
continuing shall be excluded from the calculation of the period during which the
covenant set forth in this subparagraph 8 (b) shall apply.
(c) The Employee acknowledges that he has unique knowledge and
experience relating to the business of the Company which could be prejudicial
and harmful to the operation of the Company's business if he violated the terms
of this or any other provision of this Agreement. The Employee also acknowledges
that (i) the business of the Company is national in nature and that it is
therefore reasonable for the Employee's covenant contained in subparagraph 8 (b)
to extend nationally and (ii) he is not and will not be deprived of his ability
to earn a livelihood or otherwise be unduly burdened by the covenants set forth
in this Paragraph 8. In the event of any actual or threatened breach of any of
the covenants contained in this Agreement, the Company shall be entitled to an
injunction restraining the breach thereof and may pursue any other available
remedies for such actual or threatened breach, including the recovery of
monetary damages. If, in any judicial proceeding, a court shall refuse to
enforce any of the covenants contained in this Agreement, any such unenforceable
covenant shall be deemed amended to the extent necessary to permit its
enforcement to the extent practicable; otherwise, any such covenant shall be
deemed eliminated from this Agreement for the purposes of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced.
(d) The Employee agrees that to the extent he develops or originates
or participates in the development or origination of any patents, trademarks,
trade names, service marks, copyrights or patented devices or processes (or for
which patent applications are pending) during the Employment Period which are
used in or applicable to the business of the Company, the same shall remain the
exclusive property of the Company regardless of any termination by the Company.
(e) For purposes of this Paragraph 8, the term "Company" shall be
deemed to include any and all majority and wholly owned subsidiaries of the
Company and such subsidiaries.
9. Amendment. This Agreement may be amended by written agreement of
the parties without the consent of any other persons, and no person, other than
the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof, except as provided in Paragraphs 7(b) and
-4-
10. Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and legal representatives of the Employee and
the permitted successors and assigns of the Company.
11. Nonwaiver. The waiver by either party of a breach of this
Agreement shall not be construed as a waiver of any subsequent breach.
12. Notices. Notice shall be sufficiently given if personally
delivered or shall be deemed given (5) business days after such notice is
deposited with proper postage in the United States mail, addressed to the
respective parties as set forth below or at such other address as may hereafter
be furnished:
If to the Employee: If to the Company:
Scott Tarte Marlton Technologies, Inc.
833 Muirfield Road 2828 Charter Road
Bryn Mawr, PA 19010 Philadelphia, PA 19154
Attention: President
13. Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party and is binding on the
parties hereto, their heirs, successors and assigns.
14. Headings. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define the scope or
intent of any provision or part hereof.
15. Governing Law. All controversies and disputes arising out of this
Agreement shall be determined pursuant to the laws of the [Commonwealth of
Pennsylvania], regardless of the laws that might be applied under the applicable
principles of conflicts of laws thereof.
-5-
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the employment of Employee by the
Company and, supersedes all prior agreements, understandings and negotiations,
both written and oral, between the parties hereto. This Agreement may be
modified only by a subsequent written document between the Employee and the
Company.
IN WITNESS WHEREOF, the Employee, and the Company have executed this
Agreement as of the day and year first written above.
MARLTON TECHNOLOGIES, INC.
By:________________________________
Robert B. Ginsburg
President
____________________________________
SCOTT TARTE
-6-
SCHEDULE A
For 2001 Employee will receive an annual employment bonus equal to:
7% of pre-tax profit if EPS increases from prior year by 25.0%
6% of pre-tax profit if EPS increases from prior year by 20.0%
5% of pre-tax profit if EPS increases from prior year by 17.5%
4% of pre-tax profit if EPS increases from prior year by 15.0%
3% of pre-tax profit if EPS increases from prior year by 12.5%
2% of pre-tax profit if EPS increases from prior year by 10%
1% of pre-tax profit if EPS increases from prior year by 5.0%
EPS means Earnings per share. Non-recurring profits and/or expenses will not
normally be included in bonus calculations unless such items effect cash.
However, the Board may give consideration to special circumstances.
Bonuses thereafter will be pursuant to a new bonus plan for the Employee to be
determined by the Company's compensation committee.
ANNEX VII
AMENDED AND RESTATED EMPLOYMENT AGREEMENT(1)
This Agreement is made and entered into by and between MARLTON
TECHNOLOGIES, INC., a [Pennsylvania] corporation (the "Company"), and ROBERT B.
GINSBURG (the "Employee") as of the [ ] day of [ ], 2001 (the "Effective Date").
WITNESSETH:
WHEREAS, the Company and the Employee desire to amend the Amended
Employment Agreement dated December 11, 1992, as amended on January 22, 1996 and
January 2, 1998 between Marlton Technologies, Inc., a New Jersey corporation
which has been merged into the Company, and the Employee (collectively, the
"Prior Agreement"); and
WHEREAS, the Company and the Employee desire to enter into this
Agreement to set forth the terms and conditions of the Employee's employment by
the Company, and the obligations of the parties upon termination of such
employment,
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, it is hereby agreed by and between the parties
as follows:
1. Effective Date. This Agreement shall be effective on and as of the
Effective Date, and the Prior Agreement shall be cancelled.
2. Employment Period.
(a) The Company shall employ the Employee and the Employee shall be
employed by the Company as its President and Chief Executive Officer, for the
period commencing on the Effective Date and ending December 31, 2002 (the
"Initial Term"), plus any renewal terms (the "Additional Terms") pursuant to
Paragraph 3 below (collectively the Initial Term and the Additional Terms are
referred to as the "Employment Period").
(b) During the Employment Period, the Company and its Board of
Directors agree to use their best efforts to cause Employee to be elected and
re-elected to the Company's Board of Directors.
3. Renewals. Unless sooner terminated in accordance with Paragraph 8,
after the Initial Term the Employee shall continue to be employed by the Company
for successive one year terms unless and until such time as either the Company
or the Employee gives the other party written notice at least 90 days' prior to
the expiration of the Initial Term or any Term of an intention to terminate this
Agreement effective on the last day of such Initial Term or Additional Term.
4. Performance of Duties. During his employment by the Company, the
Employee shall devote his best efforts and substantially all of his business
time to the business affairs of the Company and shall faithfully and efficiently
perform such duties, consistent with the stature and responsibility of his
position, as may be assigned to him from time to time by the Board of Directors.
The Employee shall continue to occupy his offices at 2828 Charter Road,
Philadelphia, PA 19154 and shall not be relocated without his consent, unless
the offices of the Company are relocated.
--------
(1) The New Jersey corporation will replace the Pennsylvania corporation as a
party, references to the reincorporation will be removed, and other appropriate
changes will be made if the reincorporation does not occur.
5. Compensation.
(a) During his employment by the Company, the Employee shall
receive (i) an annual base, salary of $218,445.40, payable in accordance with
Company's normal payroll practices, such salary to be reviewed annually by the
Company's Board of Directors to consider future adjustments and (ii) an annual
bonus determined and payable in accordance with Schedule A attached hereto. The
base salary and bonus provided to the Employee pursuant to this Section 5(a),
including Schedule A, shall be no less than the base salary and bonus provided
to Jeffrey Harrow or Scott Tarte pursuant to their employment agreements dated
the date hereof with the Company.
(b) The Employee shall be entitled to participate in any health
benefit plan, retirement, supplemental income or benefit plans which the Company
in its sole discretion sponsors for its employees generally at the time the
Employee is entitled to participate therein and shall be entitled to receive
reimbursement for all reasonable documented business expenses which the Employee
incurs in connection with the performance of his duties. The Company shall
furnish appropriate office facilities for Employee's Company activities. The
Company shall provide Employee with such life insurance as is obtainable for an
annual premium of no more than $6,000 and disability insurance as provided to
other senior level executives of the Company.
(c) Employee shall be entitled to 4 weeks per year of compensated
vacation time, in addition to Company recognized holidays.
6. Prior Compensation and Options. All prior compensation (including
deferred compensation) has been paid to the Employee. The exercise price for the
options covered by the option agreements between the Company and the Employee is
reduced to $.50 per share.
7. Employee Agreements. The Employee agrees:
(a) Except as otherwise required in the performance of his duties,
not to remove from the premises of the Company at any time either during or
after the term of his employment, any originals or copies of documents, reports,
drawings, lists, notebooks, test data, devices and materials and the like
pertaining to the business of the Company; and
(b) Upon termination of his employment, immediately to deliver to
the Company any and all originals or copies of documents, reports, drawings,
lists, notebooks, test data, devices and materials and the like used by him, in
his possession or under his control.
8. Termination Payments.
(a) Voluntary Termination and Termination for Cause. In the event
the Employee voluntarily terminates his employment or the Company terminates the
Employee's employment for Cause by written notice specifying the effective date
of termination, the Employee's compensation and benefits hereunder shall cease
as of the effective date of termination, to the extent permitted by law.
The term "Cause" means the Employee's (i) gross negligence, (ii)
willful misconduct, (iii) conviction of a felony, (iv) failure to devote
substantially all of his business time to the business of the Company, or (v)
repeated failure to perform those duties consistent with his position assigned
to him by the Board of Directors of the Company, which in the case of
subparagraphs (iv) or (v) has not been cured by the Employee within a reasonable
time after receipt of written notice from the Company.
-2-
(b) Termination by Death. If the Employee dies, his compensation
hereunder shall accrue up to the date of his death, with any such accrued but
unpaid amounts to be paid to his spouse or survivors in accordance with the
terms and conditions of Paragraph 5.
(c) Termination by Incapacity. If the Employee is incapacitated by
accident, sickness or otherwise so as to render him, for any period totaling 180
or more days during any consecutive twelve month period, or in the reasonable
opinion of the Company, is mentally or physically incapable of performing the
services required of him under this Agreement, the Company may terminate his
employment immediately following such 180 day period by giving him written
notice specifying the effective date of termination. Prior to such termination
under this subparagraph 8 (c), the Employee shall continue to receive his
compensation under subparagraph 5 (a), provided such compensation shall be
subject to reduction by any disability insurance payments received by the
Employee for which the Company makes premium payments.
(d) Obligations upon Termination. (i) If terminated as provided in
subparagraph 8 (a), (b) or (c), Employee's base salary pursuant to subparagraph
5(a) shall accrue up to the effective date of termination. Accrued base salary
shall be payable in accordance with the Company's normal payroll practices.
Bonus, if any, shall be calculated based on the actual full annual amounts
multiplied by a fraction equal to the number of days in the calendar year of
termination preceding the effective date of termination, divided by 365, and
shall be paid in accordance with the terms of Paragraph 5.
(ii) If Employee is terminated other than pursuant to
subparagraphs 8(a), (b) or (c), all subparagraph 5 (a) compensation payable
until the end of the Initial Term or Additional Term then in effect shall become
immediately due and payable, and Employee shall be entitled to the economic
benefit of all Company stock options as provided therein.
9. Confidentiality; Restrictive Covenants.
(a) During and after the Employment Period, the Employee will not
(i) directly or indirectly induce any other employee of the Company to enter
into or remain in the employ (whether as employee, director or consultant) of
any person, firm or corporation or have a financial interest in any business or
activity which is then or then intends to compete with the Company in the
continental United States in the business of the Company (as such term is
hereinafter defined), or (ii) divulge or appropriate to his own use or to the
use of others any information or knowledge relating to the sales prospects,
customer lists, formulae, costing, business methods, processes, techniques or
research of the Company, or any financial data relating to its sales, profits,
or costs or any of its customers or prospects, which are not known to the public
or the industry at large or shall not have been previously divulged by the
Company to such third party.
(b) The Employee further agrees that upon termination of his
employment for any reason other than termination by the Company (i) in violation
of the provisions of this Agreement or (ii) pursuant to Paragraph 3, for a
period of two years after the date of termination of employment, he will not,
directly or indirectly, enter into or remain in the employ (whether as employee,
director or consultant) of any person, firm or corporation or engage or have a
financial interest in any business or activity which is then or then intends to
compete with the Company in the continental United States for the sale of goods
similar to or competitive with those sold by the Company, (the "business of the
Company"). The term "business of the Company" shall include but not be limited
to any venture or project commenced by the Company prior to the termination of
the Employee's employment. If any court determines that the duration or
geographical limit of any restriction contained in this Paragraph is
unenforceable, it is the intention of the parties that the restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
-3-
the extent required to render it valid and enforceable, such amendment to apply
only with respect to the operation of this Paragraph in the jurisdiction of the
court that has made the adjudication. The Company and the Employee agree the
restrictive covenant set forth herein is necessary for the protection of the
legitimate business interests of the Company. In the event of a violation of the
Employee's covenant hereunder, the duration for which such violation is
continuing shall be excluded from the calculation of the period during which the
covenant set forth in this subparagraph 9 (b) shall apply.
(c) The Employee acknowledges that he has unique knowledge and
experience relating to the business of the Company which could be prejudicial
and harmful to the operation of the Company's business if he violated the terms
of this or any other provision of this Agreement. The Employee also acknowledges
that (i) the business of the Company is national in nature and that it is
therefore reasonable for the Employee's covenant contained in subparagraph 9 (b)
to extend nationally and (ii) he is not and will not be deprived of his ability
to earn a livelihood or otherwise be unduly burdened by the covenants set forth
in this Paragraph 9. In the event of any actual or threatened breach of any of
the covenants contained in this Agreement, the Company shall be entitled to an
injunction restraining the breach thereof and may pursue any other available
remedies for such actual or threatened breach, including the recovery of
monetary damages. If, in any judicial proceeding, a court shall refuse to
enforce any of the covenants contained in this Agreement, any such unenforceable
covenant shall be deemed amended to the extent necessary to permit its
enforcement to the extent practicable; otherwise, any such covenant shall be
deemed eliminated from this Agreement for the purposes of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced.
(d) The Employee agrees that to the extent he develops or
originates or participates in the development or origination of any patents,
trademarks, trade names, service marks, copyrights or patented devices or
processes (or for which patent applications are pending) during the Employment
Period which are used in or applicable to the business of the Company, the same
shall remain the exclusive property of the Company regardless of any termination
by the Company.
(e) For purposes of this Paragraph 9, the term "Company" shall be
deemed to include any and all majority and wholly owned subsidiaries of the
Company and such subsidiaries.
10. Amendment. This Agreement may be amended by written agreement of
the parties without the consent of any other persons, and no person, other than
the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof, except as provided in Paragraphs 8(b) and 11.
11. Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors and legal representatives of the Employee and
the permitted successors and assigns of the Company.
12. Nonwaiver. The waiver by either party of a breach of this Agreement
shall not be construed as a waiver of any subsequent breach.
13. Notices. Notice shall be sufficiently given if personally delivered
or shall be deemed given (5) business days after such notice is deposited with
proper postage in the United States mail, addressed to the respective parties as
set forth below or at such other address as may hereafter be furnished:
-4-
If to the Employee: If to the Company:
Robert B. Ginsburg Marlton Technologies, Inc.
2 Collage Court 2828 Charter Road
Cherry Hill, NJ 08003 Philadelphia, PA 19154
Attention: Chairman
14. Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party and is binding on the
parties hereto, their heirs, successors and assigns.
15. Headings. The headings used in this Agreement are inserted only for
the purpose of convenience and reference, and in no way define the scope or
intent of any provision or part hereof.
16. Governing Law. All controversies and disputes arising out of this
Agreement shall be determined pursuant to the laws of the [Commonwealth of
Pennsylvania], regardless of the laws that might be applied under the applicable
principles of conflicts of laws thereof.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the employment of Employee by the
Company and, supersedes all prior agreements, understandings and negotiations,
both written and oral, between the parties hereto, including the Prior
Agreement. This Agreement may be modified only by a subsequent written document
between the Employee and the Company.
IN WITNESS WHEREOF, the Employee, and the Company have executed this
Agreement as of the day and year first written above.
MARLTON TECHNOLOGIES, INC.
By:_______________________
[ ]
Robert B. Ginsburg
-5-
SCHEDULE A
For 2001 Employee will receive an annual employment bonus equal to:
7% of pre-tax profit if EPS increases from prior year by 25.0%
6% of pre-tax profit if EPS increases from prior year by 20.0%
5% of pre-tax profit if EPS increases from prior year by 17.5%
4% of pre-tax profit if EPS increases from prior year by 15.0%
3% of pre-tax profit if EPS increases from prior year by 12.5%
2% of pre-tax profit if EPS increases from prior year by 10%
1% of pre-tax profit if EPS increases from prior year by 5.0%
EPS means Earnings per share. Non-recurring profits and/or expenses will not
normally be included in bonus calculations unless such items effect cash.
However, the Board may give consideration to special circumstances.
Bonuses thereafter will be pursuant to a new bonus plan for the Employee to be
determined by the Company's compensation committee.
ANNEX VIII
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement") is dated as of
[ ], 2001, is made and entered into by and among Scott Tarte ("Tarte"), Jeffrey
Harrow ("Harrow"), Robert B. Ginsburg ("Ginsburg and together with Tarte and
Harrow, the "Investors"), and Marlton Technologies (PA), Inc., a newly formed
Pennsylvania corporation (the "Company"). Each of the Investors and any other
individual, corporation, partnership, trust, unincorporated organization or a
government or any agency or political subdivision thereof (a "Person") who shall
become a party to or agree to be bound by the terms of this Agreement after the
date hereof is sometimes hereinafter referred to as a "Stockholder."
RECITALS
A. The Company, Marlton Technologies, Inc., a New Jersey corporation
(the "Predecessor") and Tarte and Harrow have entered into a certain
subscription agreement (the "Subscription Agreement") and the Company, the
Predecessor and Ginsburg and Alan Goldberg have entered into a certain
subscription agreement (the "Second Subscription Agreement" and together with
the Subscription Agreement, the "Subscription Agreements"), each dated as of
August [ ], 2001 whereby the Investors shall acquire in the aggregate 5,000,000
shares (the "Shares") of the Company's common stock, no par value per share (the
"Common Stock") and warrants (the "Warrants") to acquire 5,000,000 shares of
Common Stock (the "Warrant Shares").
B. The Subscription Agreement provides that the parties thereto shall
execute and deliver this Stockholders' Agreement simultaneous with the
consummation of the subscription transaction described in the Subscription
Agreement.
C. As a result of the consummation of the subscription transaction
described in the Subscription Agreements, Tarte owns 2,000,000 Shares (the
"Tarte Shares") and Warrants to acquire 2,000,000 Warrant Shares (the "Tarte
Warrant Shares"; the Tarte Warrant Shares issued and outstanding at any
particular time and the Tarte Shares are sometimes referred to as the
"Outstanding Tarte Shares"), Harrow owns 2,000,000 Shares (the "Harrow Shares")
and Warrants to acquire 2,000,000 Warrant Shares(the "Harrow Warrant Shares";
the Harrow Warrant Shares issued and outstanding at any particular time and the
Harrow Shares are sometimes referred to as the "Outstanding Harrow Shares") and
Ginsburg owns 85,663 (the "Other Ginsburg Shares") shares of Common Stock which
are not Shares, plus 1,000,000 Shares (the "Ginsburg Shares") and Warrants to
acquire 1,000,000 Warrant Shares(the "Ginsburg Warrant Shares"; the Ginsburg
Warrant Shares issued and outstanding at any particular time, the Other Ginsburg
Shares and the Ginsburg Shares are sometimes referred to as the "Outstanding
Ginsburg Shares"). To the extent that any Investor obtains any shares of Common
Stock other than as the result of the exercise of Warrants such shares shall be
deemed to be Tarte Shares and Outstanding Tarte Shares, Harrow Shares and
Outstanding Harrow Shares or Ginsburg Shares and Outstanding Ginsburg Shares, as
applicable, and shall be subject to this Agreement. The Warrants, the Warrant
Shares and the Tarte Shares, Harrow Shares and Ginsburg Shares are sometimes
referred to as the "Securities." The Warrant Shares and the Tarte Shares, Harrow
Shares and Ginsburg Shares issued and outstanding at any particularly time are
sometimes referred to as the "Outstanding Shares."
1
D. The Company and the Investors desire, for their mutual benefit and
protection, to enter into this Agreement to set forth their respective rights
and obligations with respect to their Securities.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. MANAGEMENT
1.1 Board of Directors; Board Composition; Removal and
Vacancies.
(a) Number of Directors. The Board of Directors of
the Company (the "Board") following the consummation of the transactions
contemplated by the Subscription Agreement (the "Subscription") shall be
comprised of [seven] directors (the "Directors"). A Director need not be a
Stockholder.
(b) Election of Directors. Subject to Section
3.2(b), Tarte and Harrow shall have the right to designate the smallest number
of individuals (the "Designees"), as nominees for election as Directors as shall
represent a majority of the Directors, of which Designees Tarte shall designate
one half and Harrow shall designate one half (provided; however, that if
together Tarte and Harrow are entitled to designate an odd number of Designees,
in odd years Tarte shall designate one more Designee than Harrow and in even
years Harrow shall designate one more Designee than Tarte). The Designees of
Tarte and Harrow are referred to as the "Tarte Designees" and the "Harrow
Designees", respectively. A Stockholder entitled to designate Directors pursuant
to the immediately preceding sentence shall be referred to as a "Designating
Stockholder." The Stockholders hereby agree to exercise all authority under
applicable law to cause such Designees and Ginsburg (so long as Ginsburg holds
at least 500,000 Outstanding Ginsburg Shares) to be placed on the ballot at the
Company's shareholders' meetings for the election of Directors and to vote their
Outstanding Shares in favor of the election of the Designees and Ginsburg (so
long as Ginsburg holds at least 500,000 Outstanding Ginsburg Shares). If, at any
time, a Designating Stockholder shall notify the Company and the other
Stockholders in writing of such Designating Stockholder's desire to have removed
from the Board any Designee designated by such Designating Stockholder, the
Stockholders shall vote to remove such Designee and to recommend to the Board
that the Board appoint a replacement Designee selected by such Designating
Stockholder and shall use their best efforts to cause the Company's shareholders
to meet for the purpose of considering such removal and replacement and shall
vote at such meeting their respective Outstanding Shares in favor of such
removal and replacement. The Stockholders will only vote for the removal of
Designees with the written consent of the Designating Stockholder who designated
such Designee.
(c) Vacancies; Action by Stockholders. If a vacancy
is created on the Board by reason of the death, disability, removal or
resignation of any Director, the Stockholder, which, under Section 1.1(b), is
entitled to designate such Director, shall designate a new Designee to serve as
Director. Upon notice from such Designating Stockholder to the Company and the
2
other Stockholders, the Stockholders shall recommend to the Board that the Board
appoint such replacement Designee selected by such Designating Stockholder and
shall use their best efforts to cause the Company's shareholders to meet for the
purpose of considering such replacement and shall vote at such meeting their
respective Outstanding Shares in favor of such replacement.
1.2 Sale of the Company. Tarte and Harrow agree not to vote
any Outstanding Tarte Shares or Outstanding Harrow Shares within seven years of
the date hereof in favor of a merger of the Company, sale of substantially all
of the Company's assets, sale of all of the shares of Common Stock in any
transaction in which the shares of Common Stock are valued at less than $2.00
per share without the prior written consent of Ginsburg provided Ginsburg holds
more than 500,000 Outstanding Ginsburg Shares.
1.3 Action by Stockholders. Each Stockholder shall vote its
Outstanding Shares and take such other action, as is necessary or appropriate in
its capacity as a stockholder of the Company to carry out the provisions of this
Agreement.
1.4 Officers. The Investors will recommend to the Board of
Directors that the Board elect the following: so long as he is a Stockholder
holding at least 500,000 Outstanding Shares, Harrow as the Chairman of the Board
of the Company; as long as he is a Stockholder holding at least 500,000
Outstanding Shares, Ginsburg as the President and the Chief Executive Officer of
the Company and so long as he is a Stockholder holding at least 500,000
Outstanding Shares, Tarte as the Vice Chairman of the Board of the Company and
as the Chief Executive Officer of each subsidiary of the Company.
1.5 Employment Agreements. The Investors will recommend to
the Board of Directors that the Board not modify Harrow's Employment Agreement
(as such term is defined in the Subscription Agreement) so long as he is a
Stockholder holding at least 500,000 Outstanding Shares, not modify Tarte's
Employment Agreement so long as he is a Stockholder holding at least 500,000
Outstanding Shares and not modify Ginsburg's Additional Employment Agreement (as
such term is defined in the Subscription Agreement) so long as he is a
Stockholder holding at least 500,000 Outstanding Shares, other than
substantially similar modifications to all three employment agreements.
2. TRANSFERABILITY OF SECURITIES.
2.1 Restrictions Upon Transfer of Securities. Except as set
forth in this Agreement, no Stockholder shall sell, transfer, donate, give,
mortgage, pledge, hypothecate, or otherwise encumber or dispose of, whether
voluntarily, by operation of law or otherwise (any of the foregoing acts being
herein referred to as a "Transfer") any Securities now or hereafter owned by
such Stockholder. Any Transfer or attempted Transfer of Securities, unless
pursuant to the terms and conditions hereof, shall be absolutely null and void,
of no force or effect and may be enjoined. No dividend shall be paid or any
distribution made to any transferee of Securities transferred in violation
hereof nor shall any such Transfer be registered on the books of the Company.
The Transfer or attempted Transfer of any Securities in violation hereof shall
not affect the beneficial ownership of such Securities, and, notwithstanding
such Transfer or attempted Transfer, the Stockholder making such prohibited
Transfer or attempted Transfer shall retain the right to vote and the right to
receive dividend and liquidation proceeds with respect to such Securities.
3
2.2 Restrictive Legend on Certificates. Every certificate
representing certificated Securities, including Securities in existence at the
time of this Agreement, shall bear the following legend in addition to any other
legend which may be required by applicable law:
"The sale, transfer, pledge, hypothecation, or other
encumbrance or disposition of the securities represented
hereby is restricted by the terms of a certain Stockholders'
Agreement dated as of [ ], 2001 (the "Agreement"), between
the issuer of such securities and certain of its
stockholders, a copy of which is on file at the principal
place of business of such issuer and is available for
inspection by the stockholders during the regular business
hours of such issuer. Any sale, transfer, pledge,
hypothecation, or other encumbrance or disposition of the
securities represented hereby shall be absolutely void if in
contravention of the terms, provisions or conditions of such
Agreement. The securities represented by this certificate
have not been registered under the Securities Act of 1933,
as amended (the "Act"), or under any applicable state
securities law. These securities may not be sold or
transferred in the absence of an effective registration
statement under the Act and any applicable state securities
law or receipt by the issuer of an opinion of counsel
satisfactory to the issuer that registration under the Act
and applicable state law is not required."
3. PERMITTED TRANSFERS.
3.1 Permitted Transfers. Subject to the provisions of
Section 3.2, the following Transfers of Securities are permitted at any time
(each a "Permitted Transfer"):
(a) Transfers pursuant to the terms of Articles 4;
(b) Transfers by Tarte to Harrow and by Harrow to
Tarte; and
(c) Transfers to Permitted Assignees (as defined below)
(d) Transfers by Ginsburg of the Other Ginsburg Shares
"Permitted Assignees" mean (i) a Stockholder's spouse or a
child or grandchild of a Stockholder, (ii) a trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or persons
beneficially holding, directly or indirectly, a controlling interest therein are
either such Stockholder and/or such other persons referred to in clause (i)
above, or (iii) the trustees of any trust referred to in clause (ii) above.
3.2 Additional Requirements of Transfer. Any Transfer
permitted by this Agreement shall be further subject to and conditioned upon
full compliance by the transferor and transferee with each of the following
conditions:
4
(a) No Transfer shall be made: (i) to a Person who,
in accordance with applicable law, lacks the capacity to own, or otherwise is
prohibited from owning, such Securities by reason of minority, incompetence or
otherwise; or (ii) to a Person otherwise prohibited by applicable law from
entering into such transaction or holding such Securities; or (iii) which
violates any other provision of this Agreement.
(b) Upon the sale, assignment, donation or other
disposition by Tarte or Harrow of Outstanding Tarte Shares or Outstanding Harrow
Shares, respectively, as a result of which Tarte or Harrow, as the case may be,
shall cease to hold 1,000,000 Outstanding Tarte Shares, or Outstanding Harrow
Shares, respectively, Tarte or Harrow, as applicable, shall cause its Designees
to submit their resignations as directors of the Company and any Subsidiary, in
form and substance satisfactory to the Company and, if any holder of at least
1,000,000 Outstanding Tarte Shares or Outstanding Harrow Shares, as the case may
be, is a Stockholders, henceforth such holder of the Outstanding Tarte Shares or
Outstanding Harrow Shares, as the case may be, shall have the right to select
the Tarte Designees or Harrow Designees, as applicable.
(c) The transferor and transferee shall have
delivered to the Company such other agreements, instruments and other documents
(including opinions of counsel reasonably satisfactory to the Company) as the
Company shall request in order to demonstrate compliance of any such Transfer
with the provisions of this Agreement and applicable law.
(d) In the case of a transfer to a Permitted
Assignee, such Permitted Assignee shall have executed an agreement in form and
substance satisfactory to Tarte and Harrow by which such Permitted Assignee
shall have agreed to become a party to and bound by the terms and conditions of
this Agreement.
4. RIGHTS OF FIRST REFUSAL
Except for Permitted Transfers under Section 3.1 hereunder the
following shall apply:
4.1 Right of First Refusal. No Stockholder may transfer all or
any portion of its Securities unless and until such Stockholder offers to all of
the other Stockholders the right to purchase such Stockholder's Securities in
conformity with the following procedure:
(a) If a Stockholder wishes to sell (the "Selling
Stockholders") any of its Securities to a Third Party whether or not such
Selling Stockholder has received a bona fide offer to purchase such Securities,
the Selling Stockholder shall first offer to sell such Securities to the other
Stockholders (the "Non-Selling Stockholders"). The Selling Stockholder shall
send notice (an "Initial Notice") to the Non-Selling Stockholders, setting out
the Securities that the Selling Stockholder desires to sell and irrevocably
offering to sell such Securities at the price and on the terms and conditions
set forth in the Initial Notice to the Non-Selling Stockholders.
5
(b) Upon the Initial Notice being given, each of the
Non-Selling Stockholders shall have fourteen (14) business days from receipt of
the Initial Notice to agree in writing to purchase all but not less than all of
such Securities being offered; provided, however that if each Non-Selling
Stockholder so agrees to purchase such Securities then the Securities shall be
sold on a pro rata basis to their beneficial holdings or interests at the time
the Initial Notice was given. The purchase and sale transactions shall be
completed as soon as possible, but in any event, no later than twenty (20)
business days after receipt of the Initial Notice.
(c) The Selling Stockholder may sell (in the open market or
otherwise) those Securities which the Non-Selling Stockholders have not agreed
to purchase to any Third Party within sixty (60) days after the 14th day
following the receipt of the Initial Notice for the price and pursuant to terms
no more favorable to such Third Party than those set out in the Initial Notice.
If such Securities are not sold within such sixty (60) day period pursuant to
such terms, the rights of the Stockholder pursuant to this Article IV shall
again take effect with respect to any sale of such Securities and so on from
time to time.
(d) For purposes of this Article IV, "Third Party" means any
Person other than a Stockholder.
4.2 Deliveries at Closing. At the closing of the sale of
Securities pursuant to this Article, the selling and purchasing Persons shall
execute and deliver to each other the various documents which shall be required
to carry out their obligations hereunder including, without limitation, the
assignment and delivery of certificates representing the purchased Securities,
free and clear of all liens, pledges and encumbrances, and any stock powers
required in connection therewith, the execution and delivery of the Selling
Stockholder's Designee's resignations as directors of the Company, if required,
and all other documents required by this Agreement.
4.3 Payment of Purchase Price. All amounts paid in respect of
a purchase or repurchase of Securities pursuant to Section 4.1 hereof shall be
paid in cash at the closing thereof.
5. TERM AND TERMINATION.
5.1 Term of Agreement. The term of this Agreement shall be
[twenty] years, unless this Agreement shall be terminated as herein provided.
5.2 Termination. (a) This Agreement shall terminate with
respect to the Company and all Stockholders upon the occurrence of any of the
following events:
(1) The adjudication of the Company as a bankrupt, the
execution of an assignment for the benefit of creditors of the
Company, the appointment of a receiver for the Company or the
voluntary or involuntary dissolution of the Company or
(2) The execution of a written instrument, by the Company
and each of the Stockholders terminating this Agreement.
6
(b) This Agreement shall automatically terminate with respect
to a Stockholder in the event that his interest in his Securities completely
terminates and, upon such complete termination, such Stockholder shall have no
further rights or obligations hereunder other than those rights and obligations
arising prior to such termination. If such Stockholder subsequently acquires or
reacquires Securities, he shall automatically become bound once again by the
terms of this Agreement. This Section in no event shall be interpreted so as to
relieve a Stockholder of liability for his breach of or failure to comply with
any term or provision hereof arising or existing prior to or at the time of the
termination of this Agreement.
(c) Upon the termination of this Agreement, the provisions of
the restrictive legend set forth in Section 2.2 of this Agreement shall be
promptly removed from the Securities.
5.3 Effect of Termination. In the event of the termination of
this Agreement pursuant to Article 5, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party hereto;
provided, however, that the termination of this Agreement shall not relieve any
party from liability for any breach of this Agreement; and further provided,
however, that the following provisions of this Agreement shall survive
termination: Sections 5.3, 6.3 and 6.12.
6. MISCELLANEOUS.
6.1 Arm's Length Negotiations. Each party expressly represents
and warrants to the other parties that: (a) before executing this Agreement, the
party has fully informed itself of the terms, contents, conditions and effects
of this Agreement; (b) the party has relied solely and completely upon its own
judgment in executing this Agreement; (c) the party has had the opportunity to
seek and has obtained the advice of counsel before executing this Agreement; (d)
the party has acted voluntarily and of its own free will in executing this
Agreement; (e) the party is not acting under duress, whether economic or
physical, in executing this Agreement; and (f) this Agreement is the result of
arm's length negotiations conducted by and among the parties and their
respective counsel.
6.2 Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties and delivered to the parties hereto.
6.3 Expenses. Each party shall pay its own fees and expenses,
including the costs of any attorneys or consultants engaged by it, incurred in
connection with the negotiation, execution and delivery of this Agreement.
6.4 Assignment, Binding Effect. This Agreement shall bind and
inure to the benefit of the parties hereto, its heirs, executors,
administrators, successors and permitted assigns. No party may assign its rights
or delegate its obligations under this Agreement without the prior written
consent of each of the other parties hereto.
6.5 Section Headings; Gender. The Section headings herein have
been inserted for convenience of reference only, and shall in no way modify or
7
restrict any of the terms or provisions hereof. The use of neuter gender herein
shall be deemed to include the masculine and feminine genders wherever necessary
or appropriate, the use of the masculine gender shall be deemed to include the
neuter and feminine genders and the use of the feminine gender shall be deemed
to include the neuter and masculine genders wherever necessary or appropriate.
6.6 Unenforceability; Severability. If any provision of this
Agreement shall for any reason be held unenforceable, such provision to the
extent enforceable shall be severed from this Agreement unless, as a result of
such severance, the Agreement fails to reflect the basic intent of the parties.
If the Agreement continues to reflect the basic intent of the parties, then the
invalidity of such specific provision shall not affect the enforceability of any
other provision herein, and the remaining provisions shall remain in full force
and effect. If any covenant or restriction contained herein is determined by a
court of law to be overly broad, thereby making the covenant unenforceable, the
parties hereto agree, and it is their desire, that such court shall substitute a
judicially enforceable limitation in its place, and that as so modified the
covenant shall be binding upon the parties as if originally set forth herein.
6.7 Recitals. The Recitals set forth above are hereby
incorporated in and made a part of this Agreement by this reference.
6.8 Waivers; Amendment. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies herein provided are
cumulative and are not exclusive of any other rights or remedies that any party
may have at law or in equity.
6.9 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, at Marlton Technologies, Inc
2828 Charter Road
Philadelphia, PA 19154
Chairman of the Board
with a copy to: Robert Young, Jr., Esq.
McCausland, Keen & Buckman
Radnor Court, Suite 160
259 North Radnor-Chester Road
Radnor, Pennsylvania 19087-5240
8
If to the Investors: Scott Tarte
833 Muirfield Rd.
Bryn Mawr, PA 19010
Robert B. Ginsburg
2 Collage Court
Cherry Hill, NJ 08003
Jeffrey Harrow
670 Dodds Lane
Gladwyne, PA 19305
with a copy to: Avron I. Brog, Esq.
Robinson Brog Leinwand
Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
or to such other address as any party hereto to whom notice is to be given may
have furnished to the other parties hereto in writing in accordance herewith.
Any such notice or communication shall be deemed to have been delivered and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of nationally-recognized overnight courier, on the next
business day after the date when sent, (iii) in the case of telecopy
transmission when received, and (iv) in the case of mailing, on the third
business day following that on which the piece of mail containing such
communication is posted.
6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (without regard to any conflict
of laws principles) of the State of Delaware.
6.11 No Inconsistent Efforts or Agreements. No Stockholder
shall solicit proposals or enter into any agreements or arrangements of any kind
with any Person (other than a party hereto) with respect to the Company on terms
inconsistent with the provisions of this Agreement.
6.12 No Consequential Damages. Except as otherwise provided in
this Agreement, it is agreed that no Party hereto will be responsible to the
others for any indirect, special, incidental or consequential loss or damage
whatsoever (including lost profits and opportunity costs) arising out of this
Agreement.
6.13 Independent Parties. Nothing contained in this Agreement
shall be deemed or construed for any purpose to establish, between the
9
Stockholders, a partnership or joint venture, a principal-agent relationship, or
an employer-employee relationship, and neither Stockholder shall have the
authority to bind the other with respect to the Company other than as may be
provided in the operative documents executed by the Stockholders with respect to
the Company.
6.14 Entire Agreement. This Agreement, the Registration Rights
Agreement and the Subscription Agreement contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements, written or oral.
6.15 Further Assurances. Each of the parties shall execute and
deliver such other documents and take such other or further action as any other
party may reasonably request so as to consummate the transactions contemplated
hereby more effectively.
6.16 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" of any Person means any other Person directly
or indirectly through one or more intermediary Persons, controlling, controlled
by or under common control with such Person.
"control" shall mean the power to direct the management
and policies of such Person directly or indirectly, by or through stock
ownership, agency or otherwise, or pursuant to or in connection with an
agreement, arrangement or understanding (written or oral) with one or more other
Persons by or through stock ownership, agency or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
"Person" means an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
6.17 Specific Enforcement. Each Stockholder acknowledges and
agrees that the covenants and undertakings contained in this Agreement relate to
matters which are of a special, unique and extraordinary character and that a
violation of any of the terms of this Agreement will cause irreparable injury to
the Company and the Stockholders and that the amount of such injury will be
difficult, if not impossible, to estimate or determine and cannot be adequately
compensated by monetary damages. Therefore, each Stockholder agrees that the
other parties hereto shall be entitled, in addition to all other rights and
remedies available under this Agreement and applicable law, as a matter of
course, to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any violation or threatened
violation and compelling performance of any of such terms by a Stockholder and
by such other persons as the court shall order.
6.18 Effect of Permitted Assignees. In calculating Outstanding
Tarte Shares, Outstanding Harrow Shares and Outstanding Ginsburg Shares, Shares
held by Permitted Assignees of Tarte, Harrow and Ginsburg, as the case may be,
shall be included as Outstanding Tarte Shares, Outstanding Harrow Shares or
Outstanding Ginsburg Shares, respectively.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
MARLTON TECHNOLOGIES (PA), INC
By: __________________________
Name:
Title:
______________________________
SCOTT TARTE
______________________________
JEFFREY HARROW
______________________________
ROBERT GINSBURG
11
ANNEX IX
REGISTRATION RIGHTS AGREEMENT(1)
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as
of August [ ], 2001, is made and entered into by and among Scott Tarte
("Tarte"), Jeffrey Harrow ("Harrow"), Alan I. Goldberg ("Goldberg") and Robert
B. Ginsburg ("Ginsburg") (collectively, the "Investors"), and Marlton
Technologies (PA), Inc., a [newly formed Pennsylvania corporation (the
"Company") for the benefit of the Investors and to any person to whom any
Restricted Share (as defined below) is transferred (collectively, the
"Stockholders").
RECITALS
I. Pursuant to that certain Subscription Agreement dated as of
August [ ], 2001, by and between the Company, Marlton Technologies, Inc., a New
Jersey corporation (the "New Jersey Company") and Tarte and Harrow (the
"Subscription Agreement") and that certain Subscription Agreement dated as of
August [ ] by and between the Company , the New Jersey Company and Ginsburg and
Goldberg (the "Additional Subscription Agreement" and together with the
Subscription Agreement, the "Subscription Agreements"), the Company has agreed
to provide to the Stockholders certain registration rights with respect to the
shares (the "Shares") of the Company's common stock, without par value (the
"Common Stock") issued pursuant to the Subscription Agreements and shares (the
"Warrant Shares") of Common Stock issuable pursuant to the exercise of warrants
(the "Warrants") issued pursuant to the Subscription Agreements (all of such
Shares and Warrant Shares being referred to herein as the "Restricted Shares").
The Shares, plus the issued and outstanding Warrant Shares, plus the Warrant
Shares issuable upon the exercise of unexercised Warrants so long as such
Warrants are exercised prior to the effectiveness of a registration statement (a
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), on any form (other than a Registration Statement on Form S-4
or S-8 or any successor form not available for registering the Restricted
Shares, or any form for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees of the Company
pursuant to any employee benefit plan, respectively) for the general
registration of securities to be sold for cash with respect to its Common Stock
or any other class of equity security (as defined in Section 3(a) (11) of the
Securities Exchange Act of 1934, as amended) of the Company, but excluding
Warrant Shares issuable upon the exercise of unexercised Warrants if such
Warrants are not exercised prior to the effectiveness of such Registration
Statement are sometimes referred to as "Registrable Restricted Shares."
II. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Subscription Agreement.
--------------------
(1) If the Reincorporation does not occur, the New Jersey Company will replace
the Company in this Agreement and the Agreement will be revised accordingly.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein, the parties agree as follows:
1. INCIDENTAL (PIGGYBACK) REGISTRATION RIGHTS.
(a) Subject to the limitations set forth in this
Agreement, if the Company at any time after the Closing Date and prior to the
tenth anniversary of the Closing Date proposes to file on its behalf a
Registration Statement, it will give written notice to the Stockholders at least
fifteen (15) days before the initial filing with the Securities and Exchange
Commission (the "Commission") of such Registration Statement, which notice shall
set forth the intended method of disposition of the securities proposed to be
registered by the Company. The notice shall offer to include in such filing the
aggregate number of Registrable Restricted Shares as the Stockholders may
request subject to the limitations set forth in this Agreement.
(b) If any Stockholder (a "Registering Stockholder") desires
to have Registrable Restricted Shares registered under this Section 1, such
Stockholder shall advise the Company in writing within five (5) days after the
date of receipt of such offer from the Company, setting forth the amount of such
Registrable Restricted Shares for which registration is requested. The Company
shall thereupon include in such filing the number of shares of Registrable
Restricted Shares for which registration is so requested; provided that nothing
herein shall prevent the Company from abandoning or delaying any such
registration at any time and provided further that if the Registering
Stockholders request the registration of more Registrable Restricted Shares than
the Company is offering to include in such Registration Statement then the
number of Registrable Restricted Shares to be included in such Registration
Statement shall be reduced pro rata based upon the number of shares of
Registrable Restricted Shares held by each Registering Stockholder. In the event
that the proposed registration by the Company is, in whole or in part, an
underwritten public offering of securities of the Company, the Company shall not
be required to include any of the Registrable Restricted Shares in such
underwriting unless the Registering Stockholders agree to accept the offering on
the same terms and conditions as the shares of Common Stock, if any, otherwise
being sold through underwriters under such registration, and provided, further,
that if the managing underwriter advises the Company that the inclusion of all
Registrable Restricted Shares proposed to be included by the Registering
Stockholders in the underwritten public offering and other issued and
outstanding shares of Common Stock proposed to be included therein by the
persons other than the Registering Stockholders (the "Other Shares") would
jeopardize the success of the Company's offering, then the Company shall be
required to include in the offering (in addition to the number of shares to be
sold by the Company) only that number of Registrable Restricted Shares that the
managing underwriter believes will not jeopardize the success of the Company's
offering and the number of Registrable Restricted Shares and Other Shares not
included in such underwritten public offering shall be reduced pro rata based
upon the number of shares of Registrable Restricted Shares and Other Shares
requested by the holders thereof to be registered in such underwritten public
offering. In the event the Company chooses a registration form which limits the
size offering either in terms of the number of shares or dollar amount, the
Company shall not be required to include in the offering (in addition to the
number of shares to be sold by the Company) Registrable Restricted Shares which
would exceed such limits.
2
(c) Notwithstanding anything to the contrary contained in this
Section 1, in the event that there is a firm commitment underwritten public
offering of securities of the Company pursuant to a registration covering
Registrable Restricted Shares and any Registering Stockholders do not elect to
sell their Registrable Restricted Shares to the underwriters of the Company's
securities in connection with such offering and the Company nonetheless permits
such shares to be registered pursuant to such Registration Statement, such
Registering Stockholders shall refrain from selling such Registrable Restricted
Shares so registered pursuant to this Section 1 during the period of
distribution of the Company's securities by such underwriters and the period in
which the underwriting syndicate participates in the after market; provided,
however, that such Registering Stockholders shall, in any event, be entitled to
sell such Registrable Restricted Shares commencing on the 90th day after the
effective date of such Registration Statement.
2. DEMAND REGISTRATION RIGHTS
(a) If at any time subsequent to 120 days after the
Closing Date and prior to the tenth anniversary of the Closing Date (the
"Registration Period"), the Company shall receive a written request from the
holders (the "Notifying Stockholders") of a majority of the Warrant Shares
issued and outstanding as of such date and the Shares (a "Registration Request")
that the Company effect the registration on Form S-3 (or subsequent similar
form) of all or any portion of the Registrable Restricted Shares owned by the
Stockholders, the Company will, if eligible to do so on such form, use
commercially reasonable efforts to cause such Registrable Restricted Shares to
be registered under the Securities Act and to promptly effect and comply with
all such requirements as may be necessary to permit the sale or other transfer
of such Registrable Restricted Shares provided that, if registration is not
available to the Company on Form S-3 at such time, the Company shall effect
registration on such other form (the "Replacement Form") that the Notifying
Stockholders may reasonably request. The Company will give written notice to the
Stockholders other than the Notifying Stockholders at least fifteen (15) days
before the initial filing with the Commission of such Registration Statement,
which notice shall offer to include in such filing all of the Registrable
Restricted Shares as such Stockholders may request subject to the limitations
set forth in this Agreement. If any of such Stockholders desire to have
Registrable Restricted Shares registered under this Section 2, such Stockholders
shall advise the Company in writing within five (5) days after the date of
receipt of such offer from the Company, setting forth the amount of such
Registrable Restricted Shares for which registration is requested. The Company
shall thereupon include in such filing the number of shares of Registrable
Restricted Shares for which registration is so requested. The Company shall not
be obligated to file and cause to become effective more than two Registration
Statements in which Restricted Shares are sold pursuant to this Section 2(a),
nor to conduct a special audit of its financial statements, unless the
Stockholders whose shares are included in such Registration Statement undertake
3
to pay the costs associated with such audit. In addition, the Company shall not
be obligated to file and cause to become effective a registration on Form S-3 or
Replacement Form within twelve (12) months after the effective date of a prior
Form S-3 or Replacement Form registration pursuant to this Section 2(a) or a
registration of securities the aggregate offering price of which, in the
judgment of the Board of Directors of the Company, is reasonably expected to be
less than $1,000,000 (unless it is a registration of all of the Registrable
Restricted Shares).
(b) Notwithstanding the foregoing, the Company may, for a
period not to exceed 135 days (the "Delay Period") postpone filing of the
Registration Statement if the Company determines in good faith that such
registration (i) might interfere or affect the negotiation or completion of any
transaction that is being contemplated by the Company (whether or not a final
decision has been made to undertake such transaction) or (b) involve initial or
continuing disclosure obligations that might not be in the best interests of the
Company's stockholders. If, after a Registration Statement becomes effective,
the Company advises the Stockholders whose Registrable Restricted Shares are
included therein that the Company considers it appropriate for the Registration
Statement to be amended, such Stockholders shall suspend immediately any further
sales of such shares until the Company advises it that the Registration
Statement has been amended, provided, however, that the period in which such
offers and sales shall be suspended shall be added to the distribution period
calculated pursuant to Section 3(c) herein.
3. REGISTRATION PROCEDURES.
(a) In connection with the filing of a Registration
Statement pursuant hereto, the Company will:
(i) prepare and file with the Commission a
Registration Statement with respect to such securities and use commercially
reasonable efforts to cause such Registration Statement to become and remain
effective for the period of distribution contemplated thereby (as determined
pursuant to Section 3(c) herein);
(ii) use commercially reasonable efforts to prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective (and to remain effective
for the period of distribution contemplated thereby (as determined pursuant to
Section 3(c) herein)) and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by such
Registration Statement;
(iii) furnish to the Stockholders whose Registrable
Restricted Shares are included in such Registration Statement (the "Included
Stockholders") such number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such Included
Stockholders may reasonably request;
4
(iv) register or qualify the securities covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions within the United States as the Included Stockholders shall
reasonably request (provided, however, the Company shall not be obligated to
qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file any general consent to
service of process), and do such other commercially reasonable acts and things
as may be required of it to enable the Included Stockholders to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;
(v) enter into customary agreements (including if
applicable, an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Restricted Shares and as shall be required in
connection with the action taken by the Company; and
(vi) promptly notify the Included Stockholders in
writing of the happening of any event, during the period of distribution, as a
result of which the Registration Statement includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing (in which case, if so requested by the Company in
writing, the Included Stockholders shall promptly take action to cease making
any offers of the Registrable Restricted Shares included in such Registration
Statement until receipt and distribution of a revised or supplemental
prospectus).
(b) In connection with any registration hereunder, the
Included Stockholders (i) will furnish the Company in writing such information
with respect to the Included Stockholders and the proposed distribution by the
Included Stockholders as reasonably requested by the Company and all such
information necessary in order to assure compliance with Federal and applicable
state securities laws and (ii) if the Included Stockholders elect to sell the
Registrable Restricted Shares to underwriters, will enter into an agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between major
underwriters and companies of the Company's size and investment stature,
provided that such agreement shall not contain any provisions applicable to the
Company that are inconsistent with the provisions hereof and, provided further,
that the time and place of the closing of such agreement shall be as mutually
agreed upon between the Company and the managing underwriters.
(c) The period of distribution of Registrable Restricted
Shares in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it (but in no event more than the sum of any period during which
offers and sales are suspended plus, in the case of a Registration Statement
pursuant to Section 2, twelve (12) months from the effective date of such
Registration Statement and, in the case of a Registration Statement pursuant to
Section 1, ninety (90) days from the effective date of such Registration
5
Statement), and the period of distribution of Registrable Restricted Shares in
any other registration shall be deemed to extend until the earlier of the sale
of all Registrable Restricted Shares covered thereby or the sum of any period
during which offers and sales are suspended plus twelve (12) months after the
effective date thereof. The Company shall not be required to keep a Registration
Statement current after the expiration of the distribution period with respect
to the securities registered pursuant to such Registration Statement.
(d) In connection with a distribution of Registrable
Restricted Shares effected pursuant to a Registration Statement on a
non-underwritten basis, the Included Stockholders shall provide the Company with
information regarding the status of its sales of such Registrable Restricted
Shares, as and when such information is requested by the Company.
4. EXPENSES.
All expenses incurred in complying with this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, and
expenses (including attorneys' fees) of complying with the securities or blue
sky laws of any jurisdictions, except to the extent required to be paid by
participating selling security holders by state securities or blue sky laws,
and, except as otherwise provided by Section 2(a) herein, shall be paid by the
Company; provided, however, that the Stockholders (and not the Company) shall be
liable for (i) all fees, discounts and commissions to any underwriter or broker
relating to their Registrable Restricted Shares, if any, (ii) all transfer
taxes, if any, and (iii) all fees and disbursements of its legal counsel, if
any.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of
any registration of any Registrable Restricted Shares under the Securities Act
pursuant to this Agreement, the Company shall indemnify and hold harmless the
Included Stockholders, each underwriter of the Registrable Restricted Shares, if
any, each such broker or any other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement of a material fact contained
in the Registration Statement under which such Registrable Restricted Shares
were registered under the Securities Act, any final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or, with respect to
any final prospectus, necessary to make the statements therein in light of the
circumstances under which they were made, not misleading; and shall reimburse
the Included Stockholders, such underwriter, broker and each such controlling
person for any legal expenses reasonably incurred by any of them in connection
with defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be obligated to so indemnify the Included
6
Stockholders, such underwriter, broker or any such controlling person insofar as
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said Registration Statement, said final prospectus or said amendment or
supplement in reliance upon and in conformity with information furnished to the
Company or such underwriter or broker by the Included Stockholders in writing
for use in preparation thereof.
(b) INDEMNIFICATION BY THE INCLUDED STOCKHOLDERS. In the event
of any registration of any Registrable Restricted Shares under the Securities
Act pursuant to this Agreement, the Included Stockholders shall indemnify and
hold harmless (in the same manner and to the same extent as set forth in Section
5(a) hereof for the indemnification of the Included Stockholders by the Company)
the Company, each director of the Company, each officer of the Company who shall
sign such Registration Statement, each underwriter of the Registrable Restricted
Shares, if any, each such broker or any other person, if any, who controls any
of the foregoing within the meaning of the Securities Act, with respect to any
untrue statement or omission from such Registration Statement or final
prospectus contained therein or any amendment or supplement thereto, if such
untrue statement or omission was (i) made in reliance upon and in conformity
with information furnished to the Company by the Included Stockholders in
writing for use in the preparation of such Registration Statement, final
prospectus or amendment or supplement or (ii) contained in any Registration
Statement which was utilized by the Included Stockholders or any controlling
person or affiliate of the Included Stockholders after the Included Stockholders
were notified in accordance with Section 7(a) hereof that such Registration
Statement (x) should be amended, (y) contained an untrue statement of a material
fact or (z) omitted to state any material fact.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in this Section 5, such indemnified party will, if a claim in
respect thereof is made against any indemnifying party, give written notice to
the latter of such claim and/or the commencement of such action. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate in and assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, provided that if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to such
indemnified party which conflict in any material respect with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section 5, such indemnifying party shall reimburse such indemnified party
and shall not have the right to assume the defense of such action on behalf of
such indemnified party and such indemnifying party shall reimburse such
indemnified party and any person controlling such indemnified party for that
portion of the reasonable fees and expenses of any counsel retained by the
indemnified party which are reasonably related to the matters covered by the
indemnity agreement provided in this Section 5. The indemnifying party shall not
make any settlement of any claims indemnified against thereunder without the
written consent of the indemnified party or parties, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing provisions of this Section
7
5, if pursuant to an underwritten public offering of the Common Stock, the
Company, the Included Stockholders and the underwriters enter into an
underwriting or purchase agreement relating to such offering that contains
provisions covering indemnification by each of the parties thereto with respect
to each other party thereto in connection with such offering, the
indemnification provisions of this Section 5 shall be deemed inoperative for
purposes of such offering.
6. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
Notwithstanding the other provisions of this
Agreement, the Company shall not be obligated to register Restricted Shares if,
in the opinion of counsel to the Company, the sale or other disposition of such
Restricted Shares may be effected without registering such Restricted Shares
under the Securities Act and without being subject to the volume limitations
imposed by Rule 144 under the Securities Act.
7. MISCELLANEOUS.
(a) NOTICE GENERALLY. (i) Any notice or other
communication required or permitted hereunder shall be in writing and shall be
delivered personally by hand, by telecopy or mail if mailed by, registered or
certified mail postage prepaid return receipt requested or by Federal Express or
similar overnight courier service if addressed to the parties at the addresses
set forth below:
if to the Company, at Marlton Technologies, Inc
2828 Charter Road
Philadelphia, PA 19154
Chairman of the Board
with a copy to: Robert Young, Jr., Esq.
McCausland, Keen & Buckman
Radnor Court, Suite 160
259 North Radnor-Chester Road
Radnor, Pennsylvania 19087-5240
if to the Investors: Scott Tarte
833 Muirfield Rd.
Bryn Mawr, PA 19010
Robert B. Ginsburg
1941 Lark Lane
Cherry Hill, NJ 08003
with a copy to: Avron I. Brog, Esq.
Robinson Brog Leinwand
Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105
8
(ii) Unless otherwise specified herein, such notices
or other communications shall be deemed effective (A) on the date delivered, if
delivered personally or by a nationally recognized overnight courier, (B) one
business day after being sent, if sent by telecopier with confirmation of good
transmission and receipt, and (C) three business days after being sent, if sent
by registered or certified mail. Each of the Stockholders shall be entitled to
specify another address by giving notice as aforesaid to the Company.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that, the Stockholders' rights hereunder shall be
assigned in connection with a transfer pursuant to the Stockholders' Agreement
dated as of the date hereof between the parties hereto.
(c) GOVERNING LAW. This Agreement shall be governed by the
laws of the State of [Pennsylvania], without regard to the provisions thereof
relating to choice of laws.
(d) SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (i) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof.
This Agreement may not be modified or amended except by a writing executed by
the parties hereto.
(f) NO CONSEQUENTIAL DAMAGES. Except as otherwise expressly
provided in this Agreement, it is agreed that no party hereto will be
responsible to the others for any indirect, special, incidental or consequential
loss or damage whatsoever (including lost profits and opportunity costs) arising
out of this Agreement.
(g) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The
parties hereto irrevocably: (i) agree that any suit, action or other legal
proceeding arising out of this Agreement shall be brought in the courts of the
State of [Pennsylvania], (ii) consent to the jurisdiction of each such court in
any such suit, action or proceeding, (iii) waive any objection which they, or
any of them, may have to the laying of venue of any such suit, action or
proceeding in any of such courts, and (iv) agree that service of process by
registered or certified mail, at the addresses set forth in Section 7(a) hereto,
shall be good and sufficient service of process.
9
(h) COUNTERPARTS. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately,
constitute one agreement.
(i) DEFINITION OF RESTRICTED SHARES. Notwithstanding anything
to the contrary herein the terms "Restricted Shares," the "Registrable
Restricted Shares" and the "Outstanding Restricted Shares" shall not include
shares of Common Stock that are (i) disposed of in accordance with a
Registration Statement filed pursuant to this Agreement or (ii) distributed to
the public pursuant to Rule 144 under the Securities Act.
IN WITNESS WHEREOF, the Company and the Investors have
executed this Agreement as of the date first above written.
MARLTON TECHNOLOGIES (PA), INC.
By: ___________________
Name:
Title:
---------------------
SCOTT TARTE
---------------------
JEFFREY HARROW
---------------------
ROBERT GINSBURG
---------------------
ALAN GOLDBERG
10
ANNEX X
AGREEMENT AND PLAN OF MERGER(1)
OF
MARLTON TECHNOLOGIES, INC.
INTO
MARLTON TECHNOLOGIES (PA), INC.
AGREEMENT AND PLAN OF MERGER, dated as of ______ ___, 2001 by and
between Marlton Technologies, Inc. ("Marlton"), a business corporation organized
under the laws of the State of New Jersey, and Marlton Technologies (PA), Inc.
("Newco"), a business corporation organized under the laws of the Commonwealth
of Pennsylvania.
WHEREAS, the Board of Directors and shareholders of each of Marlton and
Newco have approved the merger of Marlton with and into Newco in accordance with
the New Jersey Business Corporation Act ("NJBCA") and the Pennsylvania Business
Corporation Law of 1988, as amended ("PBCL") upon the terms and subject to the
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound,
Marlton and Newco hereby agree as follows:
1. At the Effective Time (as defined in Section 2 hereof), Marlton
shall, pursuant to the provisions of each of the NJBCA and PBCL, be merged (the
"Merger") with and into Newco, which shall be the surviving corporation and
which is sometimes hereinafter referred to as the "surviving corporation," and
which shall continue to exist as said surviving corporation under the name
Marlton Technologies, Inc. The separate existence of Marlton, which is sometimes
hereinafter referred to as the "terminating corporation," shall cease at the
Effective Time.
2. The Merger shall become effective (the "Effective Time") at such
time as there shall have been filed both (a) articles of merger with the
Department of State of the Commonwealth of Pennsylvania and (b) a certificate of
merger with the Secretary of State of the State of New Jersey.
3. In furtherance and not in limitation of Section 1 hereof, the
articles of incorporation of the surviving corporation in effect immediately
prior to the Effective Time shall continue in full force and effect as the
articles of incorporation of said
-----------------
(1) The execution of this Agreement and Plan of Merger by Marlton and Newco is
predicated upon the approval by the Marlton shareholders of the sale of the
surviving corporation common stock and warrants to purchase the surviving
corporation common stock to Scott Harrow, Jeffrey Tarte, Robert Ginsburg
and Alan Goldberg, pursuant to a Subscription Agreement by and among
Marlton, Newco, Harrow and Tarte dated as of August 23, 2001 and a
Subscription Agreement by and among the Marlton, Newco, Ginsburg and
Goldberg dated as of August 23, 2001.
surviving corporation, except that Article 1 of the articles of incorporation of
the surviving corporation is hereby amended to reflect that, immediately
following the Effective Time, the name of the surviving corporation shall be
Marlton Technologies, Inc.
4. The by-laws of the surviving corporation in effect immediately prior
to the Effective Time shall continue in full force and effect as the by-laws of
said surviving corporation, except that the by-laws of the surviving corporation
are hereby amended to reflect that, immediately following the Effective Time,
the name of the surviving corporation shall be Marlton Technologies, Inc.
5. Robert Ginsburg, Jeffrey Harrow, Scott Tarte, Alan Goldberg, A.J.
Agarwal, Richard Vague and Fred Cohen shall be the members of the Board of
Directors of the surviving corporation immediately following the Effective Time.
In furtherance and not in limitation of the foregoing, immediately prior to the
Effective Time, Newco's sole director shall (i) approve an increase in the size
of Newco's Board of Directors to seven directors, (ii) appoint Robert Ginsburg,
Jeffrey Harrow, Scott Tarte, Alan Goldberg, A.J. Agarwal, Richard Vague and Fred
Cohen to Newco's Board of Directors and (iii) resign. The members of the Board
of Directors of Newco immediately prior to the Effective Time shall continue as
the members of the Board of Directors of the surviving corporation immediately
following the Effective Time and the officers in office (other than the Chairman
of the Board and the Vice Chairman of the Board) of the surviving corporation
immediately prior to the Effective Time shall continue as the officers of the
surviving corporation immediately following the Effective Time, along with
Jeffrey Harrow who shall be the first Chairman of the Board, and Scott Tarte who
shall be the first Vice Chairman of the Board, all of whom shall hold their
directorships and offices until the election and qualification of their
respective successors or until their tenure is otherwise terminated in
accordance with the by-laws of the surviving corporation.
6. Each issued share of the terminating corporation shall, at the
Effective Time, be converted into one share of the surviving corporation. The
issued shares of the surviving corporation shall, at the Effective Time, be
cancelled. No exchange of certificates representing shares of the terminating
corporation converted pursuant to this Section 6 shall be required, and from and
after the Effective Time and until certificates representing such shares are
presented for exchange or registration of transfer, all such certificates shall
be deemed for all purposes to represent the same number of shares of the
surviving corporation into which they were so converted. After the Effective
Time, whenever certificates which formerly represented shares of the terminating
corporation are presented for exchange or registration of transfer, the
surviving corporation shall cause to be issued in respect thereof certificates
representing an equal number of shares of shares of the surviving corporation.
7. From and after the Effective Time, Marlton and Newco shall take such
other and further actions, in addition to the filings described in Section 2
hereof, as may be required by law to make the Merger effective.
-2-
8. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered and directed to do any and all acts and things, and to
make, execute, deliver, file, and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement and Plan of Merger or
of the Merger herein provided for.
9. Notwithstanding shareholder approval of the Merger, this Agreement
and Plan of Merger may be terminated and abandoned by the board of directors of
either constituent corporation at any time prior to the Effective Time.
Additionally, the board of directors of either constituent corporation may, at
any time prior to the Effective Time, amend this Agreement and Plan of Merger in
any fashion permitted by applicable law.
[SIGNATURES ON NEXT PAGE]
-3-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MARLTON TECHOLOGIES, INC.
By: ________________________________
Title:_______________________________
MARLTON TECHNOLOGIES (PA), INC.
By: ________________________________
Title:_______________________________
-4-
Microfilm Number______________ Filed with the Department of State on ________
Entity Number_________________ ______________________________________________
Secretary of the Commonwealth
ARTICLES OF INCORPORATION-FOR PROFIT
OF
MARLTON TECHNOLOGIES (PA), INC.
-----------------------------------------
Name of Corporation
A TYPE OF CORPORATION INDICATED BELOW
Indicate type of domestic corporation:
_X_Business-stock (15 Pa.C.S. ss. 1306) ___Management (15 Pa.C.S. ss. 2702)
___Business-nonstock (15 Pa.C.S. ss. 2102) ___Professional (15 Pa.C.S. ss. 2903)
___Business-statutory close (15 Pa.C.S. ss. 2303) ___Insurance (15 Pa.C.S. ss. 3101)
___Cooperative (15 Pa.C.S. ss. 7102)
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned, desiring to incorporate a corporation for profit hereby, states(s)
that:
1. The name of the corporation is: Marlton Technologies (PA), Inc.
--------------------------------------------
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is:
(a) 2828 Charter Road Philadelphia, PA 19154 Philadelphia
---------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:_________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
4. The aggregate number of shares authorized is: [See attachment]
(other provision, if any, attach 8 1/2 x 11 sheet)
5. The name and address, including number and street, if any, of each
incorporator is:
Name Address
Maria E. DeCarlo Pepper Hamilton LLP, Two Logan Square, Philadelphia, PA 19103
---------------- ----------------------------------------------------------------------
________________ ______________________________________________________________________
6. The specified effective date, if any, is: Upon Filing
-----------------------------------------------------------
Month day year hour, if any
7. Any additional provisions of the articles, if any, attach an 8 1/2x 11 sheet. [See attachment]
----------------
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed these Articles of
Incorporation this 20th day of August, 2001.
/s/ Maria E. DeCarlo
------------------------------------------- --------------------------------
(Signature) (Signature)
ATTACHMENT TO ARTICLES OF INCORPORATION
OF MARLTON TECHNOLOGIES (PA), INC.
4. The total number of shares which the corporation shall have authority to
issue is 50,000,000 shares of Common Stock no par value, and 10,000,000
shares of Preferred Stock no par value. The Board may issue in one or more
class or series, or both, shares of Preferred Stock, with full, limited,
multiple, fractional or no voting rights, and with such designations,
preferences, qualifications, privileges, limitations, restrictions, options,
conversion rights or other special or relative rights as shall be fixed from
time to time by the Board.
7. The shareholders of this corporation shall NOT be entitled to cumulate votes
in the election of directors.
The shareholders of this corporation shall NOT have preemptive rights to
purchase additional shares of Common Stock.
To the fullest extent permitted by the Business Corporation Law of 1988, as
the same exists or may hereinafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
The following provisions of the Business Corporation Law of 1988, as the
same exists or may hereinafter be amended, shall not be applicable to the
corporation:
(i) Section 1715 (relating to exercise of powers generally);
(ii) Section 2538 (relating to adoption of transactions with
interested shareholders);
(iii) Subchapters E (relating to control transactions);
(iv) Subchapter F (relating to business combinations);
(v) Subchapter G (relating to control-share acquisitions); and
(vi) Subchapter H (relating to disgorgement by certain controlling
shareholders for employees terminated following attempts to
acquire control)
ANNEX XII
BYLAWS OF
MARLTON TECHNOLOGIES (PA), INC.
ARTICLE 1
OFFICES
Section 1.1. Registered Office. The registered office of Marlton
Technologies, Inc. (the "Corporation") in the Commonwealth of Pennsylvania shall
be as specified in the Articles of Incorporation of the Corporation, as they may
be amended from time to time (the "Articles"), or at such other place as the
Board of Directors of the Corporation (the "Board") may specify in a statement
of change of registered office filed with the Department of State of the
Commonwealth of Pennsylvania.
Section 1.2. Other Offices. The Corporation may also have an office or
offices at such other place or places either within or without the Commonwealth
of Pennsylvania as the Board may from time to time determine or the business of
the Corporation requires.
ARTICLE 2
MEETINGS OF THE SHAREHOLDERS
Section 2.1. Place. All meetings of the shareholders shall be held at
such places, within or without the Commonwealth of Pennsylvania, as the Board
may from time to time determine.
Section 2.2 Annual Meeting. A meeting of the shareholders for the
election of directors and the transaction of such other business as may properly
be brought before the meeting shall be held in each calendar year at such time
and place as may be determined by the Board.
Section 2.3 Written Ballot. Unless required by vote of the shareholders
before the voting begins, elections of directors need not be by written ballot.
Section 2.4 Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, may be called at any time by, the Chairman of the
Board, the Vice Chairman of the Board and the President and Chief Executive
Officer (each a "Primary Officer"), by the Board or shareholders entitled to
cast at least 30% of the votes all shareholders are entitled to cast at the
special meeting, upon written request delivered to the Secretary of the
Corporation. Any request for a special meeting of shareholders shall state the
purpose or purposes of the proposed meeting. Upon receipt of any such request,
it shall be the duty of the Secretary to give notice, in a manner consistent
with Section 2.6 of these Bylaws, of a special meeting of the shareholders to be
held at such time as the Secretary may fix, which time may not be, if the
meeting is called pursuant to a statutory right, more than sixty (60) days after
receipt of the request. If the Secretary shall neglect or refuse to fix the date
of the meeting and give notice thereof, the person or persons calling the
meeting may do so.
Section 2.5 Scope of Special Meetings. Business transacted at any
special meeting shall be confined to the business stated in the notice.
Section 2.6 Notice. Written notice of every meeting of the
shareholders, stating the place, the date and hour thereof and, in the case of a
special meeting of the shareholders, the general nature of the business to be
transacted thereat, shall be given in a manner consistent with the provisions of
Section 12.4 of these Bylaws at the direction of the Secretary of the
Corporation or, in the absence of the Secretary of the Corporation, any
Assistant Secretary of the Corporation, at least ten (10) days prior to the day
named for a meeting called to consider a fundamental change under Chapter 19 of
the Pennsylvania Business Corporation Law of 1988, as it may from time to time
be amended (the "1988 BCL"), or five (5) days prior to the day named for the
meeting in any other case, to each shareholder entitled to vote thereat on the
date fixed as a record date in accordance with Section 8.1 of these Bylaws or,
if no record date be fixed, then of record at the close of business on the tenth
(10th) day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day immediately preceding the day of the
meeting, at such address (or telex, TWX, facsimile or telephone number), as
appears on the transfer books of the Corporation. Any notice of any meeting of
shareholders may state that, for purposes of any meeting that has been
previously adjourned for one or more periods aggregating at least fifteen (15)
days because of an absence of a quorum, the shareholders entitled to vote who
attend such a meeting, although less than a quorum pursuant to Section 2.7 of
these Bylaws, shall nevertheless constitute a quorum for the purpose of acting
upon any matter set forth in the original notice of the meeting that was so
adjourned.
Section 2.7 Quorum. The shareholders present in person or by proxy,
entitled to cast at least a majority of the votes that all shareholders are
entitled to cast on any particular matter to be acted upon at the meeting, shall
constitute a quorum for the purposes of consideration of, and action on, such
matter. The shareholders present in person or by proxy at a duly organized
meeting can continue to do business until the adjournment thereof
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. If a meeting cannot be organized because a quorum has not attended, the
shareholders present in person or by proxy may, except as otherwise provided by
the 1988 BCL and subject to the provisions of Section 2.8 of these Bylaws,
adjourn the meeting to such time and place as they may determine.
Section 2.8 Adjournment. Any meeting of the shareholders, including one
at which directors are to be elected, may be adjourned for such period as the
shareholders present in person or by proxy and entitled to vote shall direct.
Other than as provided in the last sentence of Section 2.6 of these Bylaws,
notice of the adjourned meeting or the business to be transacted thereat need
not be given, other than announcement at the meeting at which adjournment is
taken, unless the Board fixes a new record date for the adjourned meeting or the
1988 BCL requires notice of the business to be transacted and such notice has
not previously been given. At any adjourned meeting at which a quorum is
-2-
present, any business may be transacted that might have been transacted at the
meeting as originally noticed.
Those shareholders entitled to vote present in person or by proxy, although
less than a quorum pursuant to Section 2.7 of these Bylaws, shall nevertheless
constitute a quorum for the purpose of (a) electing directors at a meeting
called for the election of directors that has been previously adjourned for lack
of a quorum, and (b) acting, at a meeting that has been adjourned for one or
more periods aggregating fifteen (15) days because of an absence of a quorum,
upon any matter set forth in the original notice of such adjourned meeting,
provided that such original notice shall have complied with the last sentence of
Section 2.6 of these Bylaws.
Section 2.9 Majority Voting. Any matter brought before a duly organized
meeting for a vote of the shareholders, including, without limitation, the
amendment of any bylaw, shall be decided by a majority of the votes cast at such
meeting by the shareholders present in person or by proxy and entitled to vote
thereon, unless the matter is one for which a different vote is required by
express provision of the 1988 BCL, the Articles or a bylaw adopted by the
shareholders, in any of which case(s) such express provision shall govern and
control the decision on such matter.
Section 2.10 Voting Rights. Except as otherwise provided in the
Articles, at every meeting of the shareholders, every shareholder entitled to
vote shall have the right to one vote for each share having voting power
standing in his or her name on the books of the Corporation. Shares of the
Corporation owned by it, directly or indirectly, and controlled by the Board,
directly or indirectly, shall not be voted.
Section 2.11 Proxies. Every shareholder entitled to vote at a meeting
of the shareholders may authorize another person to act for him or her by proxy.
The presence of, or vote or other action at a meeting of shareholders, by a
proxy of a shareholder, shall constitute the presence of, or vote or action by,
the shareholder. Every proxy shall be executed in writing by the shareholder or
by the shareholder's duly authorized attorney-in-fact and filed with the
Secretary of the Corporation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice of revocation has been given to the Secretary of the
Corporation. No unrevoked proxy shall be valid after three (3) years from the
date of its execution, unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted, written notice of such death or incapacity is given
to the Secretary of the Corporation.
Section 2.12 Voting Lists. The officer or agent having charge of the
transfer books for securities of the Corporation shall make a complete list of
the shareholders entitled to vote at a meeting of the shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each
shareholder, which list shall be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. If the Corporation has five thousand (5000) or more
shareholders, it may make such information available at the meeting by any other
means.
-3-
Section 2.13 Judges of Election. In advance of any meeting of the
shareholders, the Board may appoint judges of election, who need not be
shareholders, to act at such meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of any such meeting may,
and on the request of any shareholder shall, appoint judges of election at the
meeting. The number of judges shall be one (1) or three (3), as determined by
the Board to be appropriate under the circumstances. No person who is a
candidate for office to be filled at the meeting shall act as a judge at the
meeting. The judges of election shall do all such acts as may be proper to
conduct the election or vote with fairness to all shareholders, and shall make a
written report of any matter determined by them and execute a certificate of any
fact found by them, if requested by the presiding officer of the meeting or any
shareholder or the proxy of any shareholder. If there are three (3) judges of
election, the decision, act or certificate of a majority shall be effective in
all respects as the decision, act or certificate of all.
Section 2.14 Participation by Conference Call. No shareholder may
participate in any meeting of shareholders by means of conference telephone or
similar communications equipment.
ARTICLE 3
CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
Section 3.1 Unanimous Written Consent. Any action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting, if
prior or subsequent to the action, a written consent or consents thereto signed
by all of the shareholders who would be entitled to vote at a meeting for such
purpose shall be filed with the Secretary of the Corporation.
Section 3.2 Record Date - Consents. Except as otherwise provided in
Section 8.1 of these Bylaws, the record date for determining shareholders
entitled to (a) express consent to corporate action in writing without a
meeting, when prior action by the Board is not necessary, (b) call a special
meeting of the shareholders, or (c) propose an amendment of the Articles, shall
be at the close of business on the day on which the written consent, request for
a special meeting or petition proposing an amendment of the Articles is filed
with the Secretary of the Corporation. If prior action by the Board is
necessary, the record date for determining such shareholders shall be at the
close of business on the day on which the Board adopts the resolution relating
to such action.
ARTICLE 4
DIRECTORS
Section 4.1 Number and Qualifications. The number of directors shall
not be less than three nor more than 12, as shall from time to time (a) be
determined by the Board or (b) be set forth in a notice of a meeting of
-4-
shareholders called for the election of the Board, provided, however, if there
is only one shareholder there may be one director. Except as provided in Section
4.4 of these Bylaws in the case of vacancies, directors, other than those
constituting the first board of directors, shall be elected by the shareholders.
Directors shall be natural persons of full age and need not be residents of the
Commonwealth of Pennsylvania or shareholders of the Corporation.
Section 4.2 Term. Each director shall be elected to serve a term of one
(1) year and until a successor is elected and qualified or until the director's
earlier death, resignation or removal.
Section 4.3. Nominations of Directors. Nominees for election to the
Board shall be selected by the Board or a committee of the Board to which the
Board has delegated the authority to make such selections pursuant to Section
4.12 of these Bylaws. The Board or such committee, as the case may be, may
consider written recommendations from shareholders for nominees for election to
the Board provided any such recommendation, together with (a) such information
regarding each nominee as would be required to be included in a proxy statement
filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), and
(b) the consent of each nominee to serve as a director of the Corporation if so
elected, is received by the Secretary of the Corporation, in the case of an
annual meeting of shareholders, not later than the date specified in the most
recent proxy statement of the Corporation as of the date by which shareholder
proposals for consideration at the next annual meeting of shareholders must be
received and, in the case of a special meeting of shareholders, not later than
the tenth (10th) day after the giving of notice of such meeting. Only persons
duly nominated for election to the Board in accordance with this Section 4.3 and
persons with respect to whose nominations proxies have been solicited pursuant
to a proxy statement filed pursuant to the Exchange Act shall be eligible for
election to the Board.
Section 4.4 Vacancies. Vacancies in the Board, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority vote of the remaining members of the Board, even though less than a
quorum, or by a sole remaining director, and each person so elected shall serve
as a director for the balance of the unexpired term. If one or more directors
resign from the Board effective at a future date, the directors then in office,
including those who have resigned, shall have the power to fill the vacancies by
a majority vote, the vote thereon to take effect when the resignations become
effective.
Section 4.5 Removal. The entire Board or any one or more directors may
be removed from office without assigning any cause by the vote of the
shareholders.
Section 4.6 Powers. The business and affairs of the Corporation shall
be managed under the direction of its Board, which may exercise all powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Articles or these Bylaws directed or required to be exercised and done by
the shareholders.
Section 4.7 Place of Board Meetings. Meetings of the Board may be held
at such place within or without the Commonwealth of Pennsylvania as the Board
may from time to time appoint or as may be designated in the notice of the
meeting.
-5-
Section 4.8 First Meeting of Newly Elected Board. The first meeting of
each newly elected Board may be held at the same place and immediately after the
meeting at which such directors were elected and no notice shall be required
other than announcement at such meeting. If such first meeting of the newly
elected Board is not so held, notice of such meeting shall be given in the same
manner as set forth in Section 4.8 of these Bylaws with respect to notice of
regular meetings of the Board.
Section 4.9 Regular Board Meetings; Notice. Regular meetings of the
Board may be held at such times and places as shall be determined from time to
time by resolution of at least a majority of the whole Board at a duly convened
meeting, or by unanimous written consent.
Section 4.10 Special Board Meetings; Notice. Special meetings of the
Board may be called by any of the Primary Officers on notice to each director,
specifying the purpose, date, place and hour of the meeting and given at least
two (2) days before the meeting and in the same manner consistent with Section
12.4 of these Bylaws. Special meetings shall be called by the Secretary in like
manner and on like notice on the written request of two directors.
Section 4.11 Quorum of the Board. At all meetings of the Board and
committees of the Board, the presence of a majority of the directors in office
or a majority of the members of such committee, as the case may be, shall
constitute a quorum for the transaction of business, and the acts of a majority
of the directors or a majority of the members of such committee, as the case may
be, present and voting at a meeting at which a quorum is present shall be the
acts of the Board or committee as applicable. If a quorum shall not be present
at any meeting of directors or committee, the directors or members of the
committee present thereat may adjourn the meeting. It shall not be necessary to
give any notice of the adjourned meeting or of the business to be transacted
thereat other than by announcement at the meeting at which such adjournment is
taken.
Section 4.12 Committees of Directors. The Board may, by resolution
adopted by a majority of the directors in office, establish one or more
committees, each committee to consist of one or more of the directors, and may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee or for
the purposes of any written action by the committee. Any such committee, to the
extent provided in such resolution of the Board or in these Bylaws, shall have
and may exercise all of the powers and authority of the Board; provided,
however, that no such committee shall have any power or authority to (a) submit
to the shareholders any action requiring approval of the shareholders under the
1988 BCL, (b) create or fill vacancies on the Board, (c) amend or repeal these
Bylaws or adopt new bylaws, (d) amend or repeal any resolution of the Board that
by its terms is amendable or repealable only by the Board, (e) unless such
committee is an Executive Committee, act on any matter committed by these Bylaws
or by resolution of the Board to another committee of the Board, (f) amend the
Articles or adopt a resolution proposing an amendment to the Articles, or (g)
adopt a plan or an agreement of merger or consolidation, share exchange, asset
sale or division. In the absence or disqualification of a member or alternate
member or members of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not a quorum is present,
-6-
may unanimously appoint another director to act at the meeting in the place of
any absent or disqualified member. Minutes of all meetings of any committee of
the Board shall be kept by the person designated by such committee to keep such
minutes. Copies of such minutes and any writing setting forth an action taken by
written consent without a meeting shall be distributed to each member of the
Board promptly after such meeting is held or such action is taken. Each
committee of the Board shall serve at the pleasure of the Board.
Section 4.13 Participation in Board Meetings by Telephone. One or more
directors may participate in a meeting of the Board or of a committee of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
all directors so participating shall be deemed present at the meeting.
Section 4.14 Action by Consent of Directors. Any action required or
permitted to be taken at a meeting of the Board or of a committee of the Board
may be taken without a meeting if, prior or subsequent to the action, a consent
or consents in writing setting forth the action so taken shall be signed by all
of the directors in office or the members of the committee, as the case may be,
and filed with the Secretary of the Corporation.
Section 4.15 Compensation of Directors. The Board may, by resolution,
fix the compensation of directors for their services as directors. A director
may also serve the Corporation in any other capacity and receive compensation
therefor.
Section 4.16 Directors' Liability. No person who is or was a director
of the Corporation shall be personally liable for monetary damages for any
action taken, or any failure to take any action, unless (a) such director has
breached or failed to perform the duties of his or her office under the 1988 BCL
and (b) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness, or unless such liability is imposed pursuant to a
criminal statute or for the payment of taxes pursuant to local, state or federal
law.
ARTICLE 5
OFFICERS
Section 5.1 Principal Officers. The officers of the Corporation shall
be chosen by the Board, and shall include a Chairman of the Board, a Vice
Chairman of the Board, a President and Chief Executive Officer, one or more Vice
Presidents, a Secretary and a Treasurer (collectively, the "Principal
Officers"). The Board shall designate one officer (who need not be a Principal
Officer but shall not be an assistant officer) to be the chief financial officer
of the Corporation, and another officer (who need not be a Principal Officer but
shall not be an assistant officer) to be the chief accounting officer of the
Corporation. The President and Chief Executive Officer, all Vice Presidents and
the Secretary shall be natural persons of full age. The Treasurer may be a
corporation, but if a natural person, shall be of full age. Any number of
offices may be held by the same person.
-7-
Section 5.2 Electing Principal Officers. The Board, immediately after
each annual meeting of the shareholders, shall elect the Principal Officers of
the Corporation, none of whom (other than the Chairman of the Board and the Vice
Chairman of the Board) need be members of the Board. Section 1.1.
Section 5.3 Other Officers. The Corporation may have such other
officers, assistant officers, agents and employees as the Board may deem
necessary, each of whom shall hold office for such period, have such authority
and perform such duties as the Board, the Chairman of the Board, the Vice
Chairman of the Board or the President and Chief Executive Officer may from time
to time determine. The Board may delegate to any Principal Officer the power to
appoint or remove, and set the compensation of, any such other officers and any
such agents or employees.
Section 5.4 Compensation. Except as provided in Section 5.3 of these
Bylaws, the salaries of all officers of the Corporation shall be fixed by the
Board.
Section 5.5 Term of Office; Removal. Each officer of the Corporation
shall hold office until his or her successor has been chosen and qualified or
until his or her earlier death, resignation or removal. Vacancies of any office
shall be filled by the Board. Any officer or agent may be removed by the Board
with or without cause, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. The election or appointment
of an officer or agent shall not of itself create any contract rights.
Section 5.6 The Chairman of the Board. Unless otherwise determined by
the Board of Directors, the Chairman of the Board shall have the usual duties of
an executive officer with general active management of the affairs of the
Corporation. In the exercise of these duties and subject to the limitations of
the laws of the Commonwealth of Pennsylvania, these By-laws, and the actions of
the Board of Directors, the Chairman of the Board shall supervise officers, may
appoint, suspend and discharge employees and agents, shall sign or countersign
all certificates, contracts, or other instruments of the Corporation as
authorized by the Board of Directors and shall preside at all meetings of the
shareholders and Board of Directors at which he shall be present. The Chairman
of the Board shall also have such other powers and perform such other duties as
may be assigned to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the Chairman of the
Board shall have full power and authority on behalf of the Corporation, to
attend and to act and to vote at any meeting of the shareholders of any
corporation in which the Corporation may hold stock and, at any such meeting,
shall possess and may exercise any and all of the rights and powers incident to
the ownership of such stock and which, as the owner thereof, the Corporation
might have possessed and exercised.
Section 5.7 The President and Chief Executive Officer. Unless otherwise
determined by the Board of Directors, the President and Chief Executive Officer
shall have general supervision of the affairs of the Corporation, shall sign or
countersign all certificates, contracts, or other instruments of the Corporation
as authorized by the Board of Directors, may appoint, suspend and discharge
-8-
employees and agents, and shall perform any and all other duties as are incident
to her or his office or are properly required of him or her by the Board of
Directors.
Section 5.8 The Vice Chairman of the Board. Unless otherwise determined
by the Board of Directors, the Vice Chairman of the Board shall have the usual
duties of an executive officer with general active management of the affairs of
the Corporation. In the exercise of these duties and subject to the limitations
of the laws of the Commonwealth of Pennsylvania, these By-laws, and the actions
of the Board of Directors, the Vice Chairman of the Board shall be the chief
executive officer of each subsidiary of the Corporation, may appoint, suspend
and discharge employees and agents, shall sign or countersign all certificates,
contracts, or other instruments of the Corporation as authorized by the Board of
Directors, and shall in the absence of the Chairman of the Board, preside at all
meetings of the shareholders and Board of Directors at which he shall be
present. The Vice Chairman of the Board shall also have such other powers and
perform such other duties as may be assigned to him by the Board of Directors
Section 5.9 The Vice Presidents. The Vice-President or Vice-Presidents,
in the order designated by the Board, shall, in the absence or disability of the
President and Chief Executive Officer, perform the duties and exercise the
powers of the President and Chief Executive Officer, and shall perform such
other duties as the Board may prescribe or the President and Chief Executive
Officer may delegate to them.
Section 5.10 The Secretary. The Secretary shall attend all sessions of
the Board and all meetings of the shareholders and record all the votes of the
Corporation and the minutes of all the transactions in a book to be kept for
that purpose, and shall perform like duties for the committees of the Board when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board, and shall perform such other duties as may
be prescribed by the Board or the President and Chief Executive Officer, under
whose supervision the Secretary shall be. He or she shall keep in safe custody
the corporate seal, if any, of the Corporation.
Section 5.11 The Treasurer.
(1) The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as shall be designated by the Board.
(2) The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board, taking proper vouchers for such disbursements,
and shall render to the President and Chief Executive Officer and directors, at
the regular meetings of the Board, or whenever they may require it, an account
of all his or her transactions as Treasurer.
Section 5.12 Bonds. If required by the Board, any officer shall give
the Corporation a bond in such sum, and with such surety or sureties as may be
satisfactory to the Board, for the faithful discharge of the duties of his or
her office and for the restoration to the Corporation, in the case of his or her
-9-
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his or her possession or
under his or her control belonging to the Corporation.
ARTICLE 6
CERTIFICATES FOR SHARES
Section 6.1 Share Certificates. The certificates representing shares of
the Corporation shall be numbered and registered in a share register as they are
issued. The share register shall exhibit the names and addresses of all
registered holders and the number and class of shares and the series, if any,
held by each.
The Certificate shall state that the Corporation is incorporated under the
laws of the Commonwealth of Pennsylvania, the name of the registered holder and
the number and class of shares and the series, if any, represented thereby. If,
under its Articles, the Corporation is authorized to issue shares of more than
one class or series, each Certificate shall set forth, or shall contain a
statement that the Corporation will furnish to any shareholder upon request and
without charge, a full or summary statement of the designations, voting rights,
preferences, limitations and special rights of the shares of each class or
series authorized to be issued so far as they have been fixed and determined and
the authority of the Board to fix and determine such rights.
Section 6.2 Execution of Certificates. Every share certificate shall be
executed, by facsimile or otherwise, by or on behalf of the Corporation, by the
President and Chief Executive Officer, by any Vice-President, or by the
Secretary. In case any officer who has signed or whose facsimile signature has
been placed upon any share certificate shall have ceased to be such officer,
because of death, resignation or otherwise, before the certificate is issued, it
may be issued by the Corporation with the same effect as if the officer had not
ceased to be such at the time of issue.
ARTICLE 7
TRANSFER OF SHARES
Section 7.1 Transfer. Upon presentment to the Corporation or its
transfer agent of a share certificate endorsed by the appropriate person or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto and
the old certificate canceled and the transfer registered upon the books of the
Corporation, unless either: (a) the Corporation has received a demand from an
appropriate person to make an indorsement on such certificate that the
Corporation not register transfer; or (b) the Corporation has been served with a
restraining order, injunction or other process from a court of competent
jurisdiction enjoining it from registering the transfer. Any demand to the
Corporation not to register transfer shall identify the registered owner and the
issue of which such share is a part and provide an address to send
communications directed to the person making the demand. No demand described in
-10-
Section 7.1(a) above shall be effective unless it is received by the Corporation
at a time and in a manner affording the Corporation a reasonable opportunity to
act on it.
Section 7.2 Request to Register Transfer After Demand. If a share
certificate is presented to the Corporation or its transfer agent with a request
to register transfer after a demand that the Corporation not register transfer
of such certificate has become effective pursuant to Section 7.1 of these
Bylaws, then the Corporation shall promptly communicate to each of the person
who initiated the demand and the person who presented the certificate for
registration of transfer a notification stating that: (a) the certificate has
been presented for registration of transfer; (b) a demand that the Corporation
not register transfer of such certificate had previously been received; and (c)
the Corporation will withhold registration of transfer of such certificate for a
period of thirty (30) days (or such shorter period of time as stated in the
notification that is not manifestly unreasonable) from the date of the
notification in order to provide the person who initiated the demand an
opportunity to obtain legal process or an indemnity bond.
Section 7.3 Limitation of Liability. The Corporation shall not be
liable to a person who initiated a demand that the Corporation not register
transfer for any loss the person suffers as a result of registration of transfer
if the person who initiated demand does not, within the time stated in the
notification described in Section 7.2 of these Bylaws, either (a) obtain an
appropriate restraining order, injunction or other process from a course of
competent jurisdiction enjoining the Corporation from registering the transfer,
or (b) file with the Corporation an indemnity bond, sufficient in the
Corporation's to protect the Corporation or its transfer agent from any loss it
or they may suffer by refusing to register the transfer.
ARTICLE 8
RECORD DATE; IDENTITY OF SHAREHOLDERS
Section 8,1 Record Date. The Board may fix a time, prior to the date of
any meeting of the shareholders, as a record date for the determination of the
shareholders entitled to notice of, or to vote at, the meeting, which time,
except in the case of an adjourned meeting, shall not be more than ninety (90)
days prior to the date of the meeting. Except as otherwise provided in Section
8.2 of these Bylaws, only the shareholders of record at the close of business on
the date so fixed shall be entitled to notice of, or to vote at, such meeting,
notwithstanding any transfer of securities on the books of the Corporation after
any record date so fixed. The Board may similarly fix a record date for the
determination of shareholders for any other purpose. When a determination of
shareholders of record has been made as herein provided for purposes of a
meeting, the determination shall apply to any adjournment thereof unless the
Board fixes a new record date for the adjourned meeting.
Section 8.2 Certification of Nominee. The Board may adopt a procedure
whereby a shareholder may certify in writing to the Secretary of the Corporation
that all or a portion of the shares registered in the name of the shareholder
are held for the account of a specified person or persons. The Board, in
adopting such procedure, may specify (a) the classification of shareholder who
-11-
may certify, (b) the purpose or purposes for which the certification may be
made, (c) the form of certification and the information to be contained therein,
(d) as to certifications with respect to a record date, the date after the
record date by which the certification must be received by the Secretary of the
Corporation, and (e) such other provisions with respect to the procedure as the
Board deems necessary or desirable. Upon receipt by the Secretary of the
Corporation of a certification complying with the procedure, the persons
specified in the certification shall be deemed, for the purpose or purposes set
forth in the certification, to be the holders of record of the number of shares
specified instead of the persons making the certification.
ARTICLE 9
REGISTERED SHAREHOLDERS
Section 9.1 Before due presentment for transfer of any shares, the
Corporation shall treat the registered owner thereof as the person exclusively
entitled to vote, to receive notifications and otherwise to exercise all the
rights and powers of an owner, and shall not be bound to recognize any equitable
or other claim or interest in such securities, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
Commonwealth of Pennsylvania or Section 8.2 of these Bylaws.
ARTICLE 10
LOST CERTIFICATES
Section 10.1 If the owner of a share certificate claims that it has
been lost, destroyed, or wrongfully taken, the Corporation shall issue a new
certificate in place of the original certificate if the owner so requests before
the Corporation has notice that the certificate has been acquired by a bona fide
purchaser, and if the owner has filed with the Corporation an indemnity bond and
an affidavit of the facts satisfactory to the Board or its designated agent, and
has complied with such other reasonable requirements, if any, as the Board may
deem appropriate.
ARTICLE 11
DISTRIBUTIONS
Section 11.1 Distributions. Distributions upon the shares of the
Corporation, whether by dividend, purchase or redemption or other acquisition of
its shares subject to any provisions of the Articles related thereto, may be
authorized by the Board at any regular or special meeting of the Board and may
be paid directly or indirectly in cash, in property or by the incurrence of
indebtedness by the Corporation.
-12-
Section 11.2 Reserves. Before the making of any distributions, there
may be set aside out of any funds of the Corporation available for distributions
such sum or sums as the Board from time to time, in its absolute discretion,
deems proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board shall deem conducive to the interests of the
Corporation, and the Board may abolish any such reserve in the manner in which
it was created.
Section 11.3 Stock Dividends/Splits. Stock dividends or splits upon the
shares of the Corporation, subject to any provisions of the Articles related
thereto, may be authorized by the Board at any regular or special meeting of the
Board.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 Checks and Notes. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers as the
Board may from time to time designate.
Section 12.2 Fiscal Year. The fiscal year of the Corporation shall be
as determined by the Board.
Section 12.3 Seal. The corporate seal, if any, shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Pennsylvania." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced. The
affixation of the corporate seal shall not be necessary to the valid execution,
assignment or endorsement of any instrument or other document by the
Corporation.
Section 12.4 Notices. Whenever, under the provisions of the 1988 BCL or
of the Articles or of these Bylaws or otherwise, written notice is required to
be given to any person, it may be given to such person either personally or by
sending a copy thereof by first class or express mail, postage prepaid, telegram
(with messenger service specified), telex, TWX (with answerback received),
courier service (with charges prepaid) or facsimile transmission, to his or her
address, (or to his or her telex, TWX, or facsimile number), appearing on the
books of the Corporation or, in the case of directors, supplied by the director
to the Corporation for the purpose of notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person. A notice given
by telex or TWX shall be deemed to have been given when dispatched. If mailed at
least twenty (20) days prior to the meeting or corporate action to be taken,
notice may be sent by any class of post paid mail (including bulk mail).
Section 12.5 Waiver of Notice. Whenever any notice is required to be
given by the 1988 BCL or by the Articles or these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to the notice, whether before
-13-
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted nor the purpose of a meeting
need be specified in the waiver of notice of the meeting. Attendance of a person
at any meeting shall constitute a waiver of notice of the meeting, except where
any person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened, and the person so objects at the beginning of the meeting.
ARTICLE 13
AMENDMENTS
Section 13.1 Amendments. The Bylaws may be adopted, amended or repealed
by a majority vote of the shareholders entitled to vote thereon at any regular
or special meeting duly convened or, except for a bylaw on a subject expressly
committed to the shareholders by the 1988 BCL, by a majority vote of the members
of the Board at any regular or special meeting duly convened, subject always to
the power of the shareholders to change such action by the directors; however,
whenever the Bylaws require for the taking of any action by the shareholders or
a class of shareholders a specific number or percentage of votes, the provision
of the Bylaws setting forth that requirement shall not be amended or repealed by
any lesser number or percentage of votes of the shareholders or of the class of
shareholders. In the case of a meeting of shareholders, written notice shall be
given to each shareholder that the purpose, or one of the purposes, of a meeting
is to consider the adoption, amendment or repeal of the Bylaws. There shall be
included in, or enclosed with the notice, a copy of the proposed amendment or a
summary of the changes to be effected thereby. Any change in the Bylaws shall
take effect when adopted unless otherwise provided in the resolution effecting
the change.
ARTICLE 14
INDEMNIFICATION
Section 14.1 Officers and Directors - Direct Actions. The Corporation
shall indemnify any director or officer of the Corporation (as used herein, the
phrase "director or officer of the Corporation" shall mean any person who is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise (including any subsidiary of the Corporation)), any
person who was or is a party (other than a party plaintiff suing on his or her
own behalf), or who is threatened to be made such a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he or she is or was a director or
officer of the Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
met the standard of conduct of (a) acting in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
Corporation and (b) with respect to any criminal proceeding, having no
-14-
reasonable cause to believe his or her conduct was unlawful. The termination of
any action or proceeding by judgment, order, settlement or conviction or upon a
plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person (a) did not act in good faith and in a manner that
he or she reasonably believed to be in, or not opposed to, the best interests of
the Corporation and (b) with respect to any criminal proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
Section 14.2 Officers and Directors - Derivative Actions. The
Corporation shall indemnify any director or officer of the Corporation who was
or is a party (other than a party suing in the right of the Corporation), or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding by or in the right of the Corporation to procure a judgment
in the Corporation's favor by reason of the fact that he or she is or was a
director or officer of the Corporation, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of the action, suit or proceeding if he or she met the
standard of conduct of acting in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Corporation.
Indemnification shall not be made under this Section in respect of any claim,
issue or matter as to which the person has been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Common Pleas of the
judicial district embracing the county in which the registered office of the
Corporation is located or the court in which the action, suit or proceeding was
brought determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses that the Court of Common Pleas
or other court deems proper.
Section 14.3 Employees and Agents. The Corporation may, to the extent
permitted by the 1988 BCL, indemnify any employee or agent of the Corporation
(as used in this Article 14, the phrase "employee or agent of the Corporation
shall mean any person who is or was an employee or agent of the Corporation,
other than an officer, or is or was serving at the request of the Corporation as
an employee or agent of another domestic or foreign corporation for profit or
not-for-profit, partnership, joint venture, trust or other enterprise (including
any subsidiary of the Corporation) who was or is a party, or who is threatened
to be made such a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding by reason of the fact that he or she is or was
an employee or agent of the Corporation, provided he or she has met the standard
of conduct set forth in Sections 14.1 and 14.2, subject to the limitations set
forth in Section 14.2 in the case of an action, suit or proceeding by or in the
right of the Corporation to procure a judgment in the Corporation's favor.
Section 14.4 Mandatory Indemnification. To the extent that a director
or officer of the Corporation or any employee or agent of the Corporation has
been successful on the merits or otherwise in defense of any action or
proceeding referred to in Sections 14.1, 14.2 or 14.3 of this Article 14, or in
defense of any claim, issue or matter therein, he or she shall be indemnified by
-15-
the Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 14.5 Advancing Expenses. Expenses (including attorneys' fees)
incurred by a director or officer of the Corporation or an employee or agent of
the Corporation in defending any action or proceeding referred to in this
Article 14 may be paid by the Corporation in advance of the final disposition of
the action or proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount if it is ultimately determined that he or she is not
entitled to be indemnified by the Corporation as authorized in this Article 14.
Section 14.6 Procedure.
(a) Unless ordered by a court, any indemnification under
Section 14.1, 14.2 or 14.3 or advancement of expenses under Section 14.5 of this
Article 14 shall be made by the Corporation only as authorized in a specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 14.1, 14.2 or 14.3.
(b) All determinations under this Section 14.6 shall be made:
(i) With respect to indemnification under Section
14.3 and advancement of expenses to an employee or agent of the Corporation,
other than an officer, by the Board by a majority vote.
(ii) With respect to indemnification under Section
14.1 or 14.2 and advancement of expenses to a director or officer of the
Corporation,
(A) By the Board by a majority vote of a
quorum consisting of directors who were not parties to such action or
proceeding, or
(B) If such a quorum is not obtainable, or,
if obtainable and if a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or
(C) By the shareholders.
Section 14.7 Nonexclusivity of Indemnification.
(a) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article 14 shall not be deemed exclusive of any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under any Bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions in his or her official
capacity and as to actions in another capacity while holding that office.
Section 1728 (relating to interested directors; quorum) of the 1988 BCL, or any
-16-
successor section, shall be applicable to any Bylaw, agreement or transaction
authorized by the directors under this Section 14.7. The Corporation may create
a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to this Article 14 or otherwise.
(b) Indemnification pursuant to Section 14.7(a) hereof shall
not be made in any case where the act or failure to act giving rise to the claim
for indemnification is determined by a court to have constituted willful
misconduct or recklessness.
(c) Indemnification pursuant to Section 14.7(a) under any
Bylaw, agreement, vote of shareholders or directors or otherwise, may be granted
for any action taken or any failure to take any action and may be made whether
or not the Corporation would have the power to indemnify the person under any
other provision of law except as provided in this Section 14.7 and whether or
not the indemnified liability arises or arose from any threatened or pending or
completed action by or in the right of the Corporation.
Section 14.8 Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the Corporation or an employee or agent of the Corporation, against
any liability asserted against such person and incurred by him or her in any
such capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against that liability
under the provisions of this Article 14 or otherwise.
Section 14.9 Past Officers and Directors. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article 14
shall continue as to a person who has ceased to be a director, officer, employee
or agent of the Corporation and shall inure to the benefit of the heirs and
personal representatives of that person.
Section 14.10 Surviving or New Corporations. References to "the
Corporation" in this Article 14 include all constituent corporations absorbed in
a consolidation, merger or division, as well as the surviving or new corporation
resulting therefrom, so that any director, officer, employee or agent of the
constituent, surviving or new corporation shall stand in the same position under
the provisions of this Article 14 with respect to the surviving or new
corporation as he or she would if he or she had served the surviving or new
corporation in the same capacity.
Section 14.11 Employee Benefit Plans.
(a) References in this Article 14 to "other enterprises" shall
include employee benefit plans and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation that imposes duties on, or involves services by, the person
with respect to an employee benefit plan, its participants or beneficiaries.
-17-
(b) Excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be deemed "fines."
(c) Action with respect to an employee benefit plan taken or
omitted in good faith by a director, officer, employee or agent of the
Corporation in a manner he or she reasonably believed to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be action in a
manner that is not opposed to the best interests of the Corporation.
-18-
ANNEX XIII
MARLTON TECHNOLOGIES, INC.
2001 EQUITY INCENTIVE PLAN
SECTION 1. Purpose; Definitions. The purposes of the Marlton
Technologies, Inc. 2001 Equity Incentive Plan (the "Plan") are to: (a) enable
Marlton Technologies, Inc. (the "Company") and its affiliated companies to
recruit and retain highly qualified employees, directors and consultants; (b)
provide those employees, directors and consultants with an incentive for
productivity; and (c) provide those employees, directors and consultants with an
opportunity to share in the growth and value of the Company.
For purposes of the Plan, the following initially capitalized words and
phrases will be defined as set forth below, unless the context clearly requires
a different meaning:
a. "Affiliate" means, with respect to a Person, a Person that directly
or indirectly controls, or is controlled by, or is under common control with
such Person.
b. "Award" means a grant of Options or Restricted Shares pursuant to
the provisions of this Plan.
c. "Award Agreement" means, with respect to any particular Award, the
written document that sets forth the terms of that particular Award.
d. "Board" means the Board of Directors of the Company, as constituted
from time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board's administrative functions hereunder pursuant
to Section 2, references in this Plan to the "Board" will be deemed to also
refer to that Committee in connection with administrative matters to be
performed by that Committee.
e. "Cause" means (i) alcohol abuse or use of controlled drugs (other
than in accordance with a physician's prescription); (ii) refusal, failure or
inability to perform any material obligation or fulfill any duty (other than any
duty or obligation of the type described in clause (iv) below) to the Company
(other than due to a Disability), which failure, refusal or inability is not
cured within ten (10) days after delivery of notice thereof; (iii) gross
negligence or willful misconduct in the course of employment; (iv) any breach of
any obligation or duty to the Company or any of its Subsidiaries or Affiliates
(whether arising by statute, common law, contract or otherwise) relating to
confidentiality, noncompetition, nonsolicitation or proprietary rights; (v)
other conduct involving any type of disloyalty to the Company or any of its
Affiliates or Subsidiaries, including, without limitation, fraud, embezzlement,
theft or proven dishonesty; and (vi) conviction of (or the entry of a plea of
guilty or nolo contendere to) a misdemeanor involving moral turpitude or a
felony. Notwithstanding the foregoing, if a Participant and the Company (or any
of its Affiliates or Subsidiaries) have entered into an employment agreement,
consulting agreement or other similar agreement that specifically defines
"cause," then with respect to such Participant, "Cause" shall have the meaning
defined in that employment agreement, consulting agreement or other agreement.
f. "Change in Control" means (i) the sale, transfer, assignment or
other disposition (including by merger or consolidation, but excluding any sales
by stockholders made as part of an underwritten public offering of the common
stock of the Company) by stockholders of the Company, in one transaction or a
series of related transactions, of more than fifty percent (50%) of the voting
power represented by the then outstanding capital stock of the Company to one or
more Persons, (ii) the sale of substantially all the assets of the Company
(other than a transfer of financial assets made in the ordinary course of
business for the purpose of securitization), or (iii) the liquidation or
dissolution of the Company.
g. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
h. "Committee" means a committee appointed by the Board in accordance
with Section 2 of this Plan.
i. "Director" means a member of the Board.
j. "Disability" means a condition rendering an Optionee Disabled.
k. "Disabled" will have the same meaning as set forth in Section
22(e)(3) of the Code.
l. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
m. "Fair Market Value" means, as of any date: (i) if the Shares are not
traded in the over-the-counter market, the value of such Shares on that date, as
determined by the Board in its sole and absolute discretion; or (ii) if the
Shares are traded in the over-the-counter market, the Fair Market Value per
Share shall be the mean of the bid and asked prices for a Share on the relevant
valuation date as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotations ("NASDAQ") System), as applicable or, if there is no
trading on such date, on the next preceding date on which there were reported
Share prices. In the event Shares are listed on a national or regional
securities exchange or traded through the NASDAQ National Market, the Fair
Market Value of a Share shall be the closing price for a Share on the exchange
or on the NASDAQ National Market, as reported in The Wall Street Journal on the
relevant valuation date, or if there is no trading on that date, on the next
preceding date on which there were reported Share prices.
n. "Incentive Stock Option" means any Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
o. "Non-Employee Director" will have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board or the Committee may, to the
extent that it deems necessary to comply with Section 162(m) of the Code or
regulations thereunder, require that each "Non-Employee Director" also be an
"outside director" as that term is defined in regulations under Section 162(m).
p. "Non-Qualified Stock Option" means any Option that is not an
Incentive Stock Option.
-2-
q. "Option" means any option to purchase Shares (including Restricted
Shares, if the Board so determines) granted pursuant to Section 5 hereof.
r. "Participant" means an employee, consultant or Director of the
Company or any of its Affiliates to whom an Award is granted.
s. "Person" means an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.
t. "Restricted Shares" means Shares that are subject to restrictions
pursuant to Section 7 hereof.
u. "Share" means a share of Company's common stock, subject to
substitution or adjustment as provided in Section 3(c) hereof.
v. "Subsidiary" means, in respect of the Company, a subsidiary company,
whether now or hereafter existing, as defined in Sections 424(f) and (g) of the
Code.
SECTION 2. Administration. The Plan will be administered by the Board;
provided, however, that the Board may at any time appoint a Committee to perform
some or all of the Board's administrative functions hereunder; and provided
further, that the authority of any Committee appointed pursuant to this Section
2 will be subject to such terms and conditions as the Board may prescribe and
will be coextensive with, and not in lieu of, the authority of the Board
hereunder.
Any Committee established under this Section 2 will be composed of not
fewer than two members, each of whom will serve for such period of time as the
Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Securities Exchange
Act of 1934, all members of any Committee established pursuant to this Section 2
will be Non-Employee Directors. From time to time the Board may increase the
size of the Committee and appoint additional members thereto, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
Members of the Board who are eligible for Awards or have received
Awards may vote on any matters affecting the administration of the Plan or the
grant of Awards, except that no such member will act upon the grant of an Award
to himself or herself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is taken
with respect to the grant of Awards to himself or herself.
The Board will have full authority to grant Awards under this Plan. In
particular, the Board will have the authority:
a. to select the persons to whom Awards may from time to time be
granted hereunder (consistent with the eligibility conditions set forth in
Section 4);
b. to determine the type of Award to be granted to any person
hereunder;
-3-
c. to determine the number of Shares, if any, to be covered by each
such Award;
d. to establish the terms and conditions of each Award Agreement;
e. to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(d); and
f. to determine whether, to what extent and under what circumstances
Shares and other amounts payable with respect to an Award may be deferred either
automatically or at the election of the Participant.
The Board will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it, from
time to time, deems advisable; to interpret the terms and provisions of the Plan
and any Award issued under the Plan (and any Award Agreement); to amend the
terms of any Award Agreement, provided that the Participant consents to such
amendment; and to otherwise supervise the administration of the Plan. The Board
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent it deems necessary to
carry out the intent of the Plan.
All decisions made by the Board pursuant to the provisions of the Plan
will be final and binding on all persons, including the Company and
Participants. No member of the Board will be liable for any good faith
determination, act or omission in connection with the Plan or any Award.
SECTION 3. Shares Subject to the Plan.
a. Shares Subject to the Plan. The Shares to be subject to Options or
Restricted Shares under the Plan will be authorized and unissued Shares of the
Company, whether or not previously issued and subsequently acquired by the
Company. The maximum number of Shares that may be subject to Options or
Restricted Shares under the Plan is 2,000,000 and the Company will reserve for
the purposes of the Plan, out of its authorized and unissued Shares, such number
of Shares. Notwithstanding the foregoing, no individual may receive Awards with
respect to more than 1,000,000 Shares in any calendar year.
b. Effect of the Expiration or Termination of Awards. If and to the
extent that an Option expires, terminates or is canceled or forfeited for any
reason without having been exercised in full, the Shares associated with that
Option will again become available for grant under the Plan. Similarly, if any
Restricted Share is canceled, forfeited or repurchased for any reason, or if any
Share is withheld pursuant to Section 9(d) in settlement of a tax withholding
obligation associated with an Award, that Share will again become available for
grant under the Plan. Finally, if any Share is received in satisfaction of the
exercise price payable upon exercise of an Option, that Share will become
available for grant under the Plan.
c. Other Adjustment. In the event of any recapitalization, stock split
or combination, stock dividend or other similar event or transaction affecting
the Shares, equitable substitutions or adjustments will be made by the Board, in
its sole and absolute discretion, to the aggregate number, type and issuer of
the securities reserved for issuance under the Plan, to the number, type and
issuer of Shares subject to outstanding Options, to the exercise price of
outstanding Options, and to the number, type and issuer of Restricted Shares.
-4-
d. Change in Control. Notwithstanding anything to the contrary set
forth in this Plan, upon or in anticipation of any Change in Control, the Board
may, in its sole and absolute discretion and without the need for the consent of
any Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) cause all outstanding Options to
become fully vested and immediately exercisable; (ii) cause all outstanding
Restricted Shares to become non-forfeitable; (iii) cancel any Option in exchange
for an option to purchase common stock of any successor corporation, which new
option satisfies the requirements of Treas. Reg. ss. 1.425-1(a)(4)(i)
(notwithstanding the fact that the original Option may never have been intended
to satisfy the requirements for treatment as an Incentive Stock Option), (iv)
cancel any Restricted Shares in exchange for restricted shares of the common
stock of any successor corporation, (v) redeem any Restricted Share for cash
and/or other substitute consideration with a value equal to the Fair Market
Value of an unrestricted Share on the date of the Change in Control; (vi) cancel
any Option in exchange for cash and/or other substitute consideration with a
value equal to (A) the number of Shares subject to that Option, multiplied by
(B) the difference between the Fair Market Value per Share on the date of the
Change in Control and the exercise price of that Option; provided, however, the
Board may not take any action with respect to the Plan that would make a Change
in Control ineligible for pooling of interests accounting treatment or any
particular tax treatment if, in the absence of such action, the Change in
Control would qualify for such treatment and the Company intends to use such
treatment with respect to that Change in Control.
SECTION 4. Eligibility. Employees, directors, consultants, and other
individuals who provide services to the Company or its Affiliates are eligible
to be granted Awards under the Plan. Persons who are not employees of the
Company or a Subsidiary are eligible to be granted Awards, but are not eligible
to be granted Incentive Stock Options.
SECTION 5. Options. Options granted under the Plan may be of two types:
(i) Incentive Stock Options or (ii) Non-Qualified Stock Options. Any Option
granted under the Plan will be in such form as the Board may from time to time
approve.
The Award Agreement evidencing any Option will incorporate the
following terms and conditions and will contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Board deems
appropriate in its sole and absolute discretion:
a. Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option will be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option will be not less than 100%
of the Fair Market Value of the Share on the date of the grant. However, any
Incentive Stock Option granted to any Participant who, at the time the Option is
granted, owns more than 10% of the voting power of all classes of shares of the
Company or of a Subsidiary will have an exercise price per Share of not less
than 110% of Fair Market Value per Share on the date of the grant.
b. Option Term. The term of each Option will be fixed by the Board, but
no Option will be exercisable more than ten (10) years after the date the Option
is granted. However, any Incentive Stock Option granted to any Participant who,
at the time such Option is granted, owns more than 10% of the voting power of
all classes of shares of the Company or of a Subsidiary may not have a term of
more than five (5) years. No Option may be exercised by any person after
expiration of the term of the Option.
-5-
c. Exercisability. Options will vest and be exercisable at such time or
times and subject to such terms and conditions as determined by the Board at the
time of grant. If the Board provides, in its discretion, that any Option is
exercisable only in installments, the Board may waive such installment exercise
provisions at any time at or after grant, in whole or in part, based on such
factors as the Board determines, in its sole and absolute discretion.
d. Method of Exercise. Subject to the exercise provisions under Section
5(c) and the termination provisions set forth in Section 6, Options may be
exercised in whole or in part at any time and from time to time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of Shares to be purchased. Such notice will be accompanied by payment
in full of the purchase price, either by certified or bank check, or such other
means as the Board may accept. As determined by the Board, in its sole
discretion, at or after grant, payment in full or in part of the exercise price
of an Option may be made in the form of previously acquired Shares based on the
Fair Market Value of the Shares on the date the Option is exercised; provided,
however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of previously acquired Shares may be authorized only at the
time the Option is granted.
No Shares will be issued upon exercise of an Option until full payment
therefor has been made. A Participant will not have the right to distributions
or dividends or any other rights of a shareholder with respect to Shares subject
to the Option until the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has made the representations
described in Section 9(a) hereof.
e. Incentive Stock Option Limitations. In the case of an Incentive
Stock Option, the aggregate Fair Market Value (determined as of the time of
grant) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year under
the Plan and/or any other plan of the Company or any Subsidiary will not exceed
$100,000. For purposes of applying the foregoing limitation, Incentive Stock
Options will be taken into account in the order granted. Any Option not meeting
such limitation will be treated for all purposes as a Non-Qualified Stock
Option.
f. Termination of Employment. Unless otherwise specified in the Award
Agreement, Options will be subject to the terms of Section 6 with respect to
exercise upon termination of employment.
g. Transferability of Options. Except as may otherwise be specifically
determined by the Board with respect to a particular Option, no Option will be
transferable by the Participant other than by will or by the laws of descent and
distribution, and all Options will be exercisable, during the Participant's
lifetime, only by the Participant or, in the event of his Disability, by his
personal representative.
-6-
SECTION 6. Termination of Service. Unless otherwise specified with
respect to a particular Option in the applicable Award Agreement, all Options
will remain exercisable after termination of employment only to the extent
specified in this Section 6.
a. Termination by Reason of Death. If a Participant's service with the
Company or any Affiliate terminates by reason of death, any Option held by such
Participant may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Board may determine, at or after grant, by the
legal representative of the estate or by the legatee of the Participant under
the will of the Participant, for a period expiring (i) at such time as may be
specified by the Board at or after the time of grant, or (ii) if not specified
by the Board, then twelve (12) months from the date of death, or (iii) if sooner
than the applicable period specified under (i) or (ii) above, then upon the
expiration of the stated term of such Option.
b. Termination by Reason of Disability. If a Participant's service with
the Company or any Affiliate terminates by reason of Disability, any Option held
by such Participant may thereafter be exercised by the Participant or his
personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Board may determine at or after
grant, for a period expiring (i) at such time as may be specified by the Board
at or after the time of grant, or (ii) if not specified by the Board, then
twelve (12) months from the date of termination of service, or (iii) if sooner
than the applicable period specified under (i) or (ii) above, then upon the
expiration of the stated term of such Option.
c. Cause. If a Participant's service with the Company or any Affiliate
is terminated for Cause: (i) any Option not already exercised will be
immediately and automatically forfeited as of the date of such termination, and
(ii) any Shares for which the Company has not yet delivered share certificates
will be immediately and automatically forfeited and the Company will refund to
the Participant the Option exercise price paid for such Shares, if any.
d. Other Termination. If a Participant's service with the Company or
any Affiliate terminates for any reason other than death, Disability or Cause,
any Option held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such termination,
or on such accelerated basis as the Board may determine at or after grant, for a
period expiring (i) at such time as may be specified by the Board at or after
the time of grant, or (ii) if not specified by the Board, then 90 days from the
date of termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option.
SECTION 7. Restricted Shares.
a. Issuance. Restricted Shares may be issued either alone or in
conjunction with other Awards. The Board will determine the time or times within
which Restricted Shares may be subject to forfeiture, and all other conditions
of such Awards.
-7-
b. Awards and Certificates. The Award Agreement evidencing the grant of
any Restricted Shares will contain such terms and conditions, not inconsistent
with the terms of the Plan, as the Board deems appropriate in its sole and
absolute discretion. The prospective recipient of an Award of Restricted Shares
will not have any rights with respect to such Award, unless and until such
recipient has executed an Award Agreement and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such Award. The purchase price for Restricted Shares
may, but need not, be zero.
A share certificate will be issued in connection with each Award of
Restricted Shares. Such certificate will be registered in the name of the
Participant receiving the Award, and will bear the following legend and/or any
other legend required by this Plan, the Award Agreement or by applicable law:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE MARLTON
TECHNOLOGIES, INC. 2001 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED
INTO BETWEEN [THE PARTICIPANT] AND MARLTON TECHNOLOGIES, INC. (WHICH
TERMS AND CONDITIONS MAY INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER
RESTRICTIONS, REPURCHASE RIGHTS AND FORFEITURE CONDITIONS). COPIES OF
THAT PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF MARLTON
TECHNOLOGIES, INC. AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE
COMPANY.
Share certificates evidencing Restricted Shares will be held in custody
by the Company or in escrow by an escrow agent until the restrictions thereon
have lapsed. As a condition to any Restricted Share Award, the Participant may
be required to deliver to the Company a share power, endorsed in blank, relating
to the Shares covered by such Award.
c. Restrictions and Conditions. The Restricted Shares awarded pursuant
to this Section 7 will be subject to the following restrictions and conditions:
(i) During a period commencing with the date of grant of an Award of
Restricted Shares and ending at such time or times as specified by the Board
(the "Restriction Period"), the Participant will not be permitted to sell,
transfer, pledge, assign or otherwise encumber Restricted Shares awarded under
the Plan. The Board may condition the lapse of restrictions on Restricted Shares
upon the continued employment or service of the Participant, the attainment of
specified individual or corporate performance goals, or such other factors as
the Board may determine, in its sole and absolute discretion.
(ii) Consistent with Section 3(c), any distributions or dividends
paid in the form of securities with respect to Restricted Shares will be subject
to the same terms and conditions as the Restricted Shares with respect to which
they were paid, including, without limitation, the same Restriction Period.
-8-
(iii) Subject to the applicable provisions of the Award Agreement,
if a Participant's service with the Company terminates prior to the expiration
of the Restriction Period, all of that Participant's Restricted Shares which
then remain subject to forfeiture will be forfeited.
(iv) In the event of hardship or other special circumstances of a
Participant whose service with the Company is involuntarily terminated (other
than for Cause), the Board may, in its sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such Participant's
Restricted Shares, based on such factors as the Board may deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Shares (or if and when the restrictions applicable
to Restricted Shares lapse pursuant to Sections 3(d) or 7(c)(iv)), the
certificates for such Shares will be replaced with new certificates, without the
portion of restrictive legends described in Section 7(b) applicable to such
lapsed restrictions, and such new certificates will be promptly delivered to the
Participant, the Participant's representative (if the Participant has suffered a
Disability), or the Participant's estate or heir (if the Participant has died).
SECTION 8. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but, except as otherwise provided in Section
3(d) of the Plan, no amendment, alteration or discontinuation will be made which
would impair the rights of a Participant with respect to an Award, without that
Participant's consent, or which, without the approval of such amendment within
one year (365 days) of its adoption by the Board, by a majority of the votes
cast at a duly held shareholder meeting at which a quorum representing a
majority of the Company's outstanding voting shares is present (either in person
or by proxy), would: (i) increase the total number of Shares reserved for the
purposes of the Plan (except as otherwise provided in Section 3(c)), or (ii)
change the persons or class of persons eligible to receive Awards.
SECTION 9. General Provisions.
a. The Board may require each Participant to represent to and agree
with the Company in writing that the Participant is acquiring any unregistered
securities of the Company for investment purposes and without a view to
distribution thereof and as to such other matters as the Board believes are
appropriate. The certificate evidencing any Award and any securities issued
pursuant thereto may include any legend which the Board deems appropriate to
reflect any restrictions on transfer and compliance with securities laws.
All certificates for Shares or other securities delivered under the
Plan will be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations, and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable Federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
-9-
b. Nothing contained in the Plan will prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
c. The adoption of the Plan will not confer upon any employee of the
Company or a Subsidiary any right to continued employment with the Company or
such Subsidiary, nor will it interfere in any way with the right of the Company
or such Subsidiary to terminate the employment of any of its employees at any
time.
d. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award under the Plan, the Participant will pay to
the Company, or make arrangements satisfactory to the Board regarding the
payment of, any Federal, state or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the Board,
the minimum required withholding obligations may be settled with Shares,
including Shares that are part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan will be conditioned
on such payment or arrangements and the Company will, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
SECTION 10. Effective Date of Plan. This Plan will become effective on
the date that it is approved by a majority of the votes cast at a duly held
shareholder meeting at which a quorum representing a majority of Company's
outstanding voting shares is present, either in person or by proxy.
SECTION 11. Term of Plan. This Plan will continue in effect until
terminated in accordance with Section 8; provided, however, that no Incentive
Stock Option will be granted hereunder on or after the tenth (10th) anniversary
of the date of shareholder approval of the Plan; but provided further, that
Incentive Stock Options granted prior to such tenth (10th) anniversary may
extend beyond that date.
SECTION 12. Invalid Provisions. In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any applicable law,
such invalidity or unenforceability will not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions will be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
SECTION 13. Governing Law. This Plan and all Awards granted hereunder
will be governed by and construed in accordance with the laws and judicial
decisions of the Commonwealth of Pennsylvania, without regard to the application
of the principles of conflicts of laws.
-10-
SECTION 14. Board Action. Notwithstanding anything to the contrary set
forth in this Plan, any and all actions of the Board or Committee, as the case
may be, taken under or in connection with this Plan and any agreements,
instruments, documents, certificates or other writings entered into, executed,
granted, issued and/or delivered pursuant to the terms hereof, will be subject
to and limited by any and all votes, consents, approvals, waivers or other
actions of all or certain stockholders of the Company or other persons required
by:
a. the Company's Articles of Incorporation (as the same may be
amended and/or restated from time to time); and
b. the Company's Bylaws (as the same may be amended and/or restated
from time to time).
SECTION 15. Notices. Any notice to be given to the Company pursuant to
the provisions of the Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to time)
at its principal executive office, and any notice to be given to a Participant
shall be delivered personally or addressed to him or her at the address given
beneath his or her signature on his or her Award Agreement, or at such other
address as such Participant may hereafter designate in writing to the Company.
Any such notice shall be deemed duly given on the date and at the time delivered
via personal, courier or recognized overnight delivery service or, if sent via
telecopier, on the date and at the time telecopied with confirmation of delivery
or, if mailed, on the date five (5) days after the date of the mailing (which
shall be by regular, registered or certified mail). Delivery of a notice by
telecopy (with confirmation) shall be permitted and shall be considered delivery
of a notice notwithstanding that it is not an original that is received.
-11-
MARLTON TECHNOLOGIES, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 7, 2001.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointment, the undersigned hereby appoints
Fred Cohen, William F. Hamilton and Seymour Hernes, and each of them, attorneys
and agents, with power of substitution, to vote as proxy for the undersigned, as
herein stated, at the Annual Meeting of Shareholders of Marlton Technologies,
Inc., to be held, on November 7, 2001 at 9:00 A.M. at the Main Conference Room,
Sparks Exhibits Building, 2828 Charter Road, Philadelphia, Pennsylvania, and at
any adjournments thereof, with respect to the number of shares the undersigned
would be entitled to vote if personally present.
This Proxy when properly executed will be voted in the manner directed
on the reverse side. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR
OF THE NOMINEES FOR THE ELECTION OF DIRECTORS (WITH DISCRETIONARY AUTHORITY OF
THE PROXY HOLDERS TO CUMULATE VOTES), FOR THE APPROVAL OF THE INVESTMENT
PROPOSAL, FOR THE APPROVAL OF THE REINCORPORATION PROPOSAL AND FOR THE APPROVAL
OF THE 2001 EQUITY INCENTIVE PLAN PROPOSAL. This Proxy will be voted, in the
discretion of the proxyholders, upon such other business as may properly come
before the Annual Meeting of Shareholders or any adjournments thereof.
(Please vote and sign on the other side.)
B-1
--------
Please mark your
X votes as in this
example.
--------
This proxy is solicited by the Board of Directors. The Board
Management recommends a vote FOR the Directors nominated and
Matters No. 3 and No. 4. The Independent Committee of the Board
recommends a vote FOR the Matter No. 2
1. Election of Directors.
Nominees: Fred Cohen and William F. Hamilton
[ __ ] Vote for all (except as marked to the contrary below).
[ __ ] Withhold authority to vote for all.
(Instruction: To withhold authority to vote for any individual nominee,
print that nominee's name on the line below.)
--------------------------------
2. Approval of Investment Transaction Proposal
[ __ ] For [ __ ] Against [ __ ] Abstain
3. Approval of Reincorporation Proposal
[ __ ] For [ __ ] Against [ __ ] Abstain
4. Approval of 2001 Equity Incentive Plan Proposal
[ __ ] For [ __ ] Against [ __ ] Abstain
5. In their discretion, the Proxy Holders are authorized to vote upon
such other matters as may properly come before the meeting or at any
adjournments thereof.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE _____________________________ Date_______________________________
SIGNATURE _____________________________ Date_______________________________
Signature if held jointly
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or
guardian, please provide full title and capacity.
B-2